Business Loan Calculator

What the calculator does

The business loan calculator answers three questions about any fixed-rate term loan: what's the monthly payment, how much interest will I pay in total, and what does the loan really cost? You enter the amount, the APR, and the term; the calculator runs the standard amortization math that nearly every term loan uses.

Amortization in plain English

An amortized loan is repaid in equal monthly payments, but the payments aren't split evenly between interest and principal. Each month, interest is charged on whatever balance remains. Early on, the balance is large, so a big slice of your payment goes to interest. As the balance shrinks, the interest slice shrinks with it, and more of each identical payment chips away at principal. The payment never changes — only its composition does.

The formula that produces that equal payment:

M = P × r ÷ (1 − (1 + r)^−n)

• P — the amount borrowed (principal)
• r — the monthly interest rate: APR ÷ 12
• n — the number of monthly payments

A worked example, all the way through

Say you borrow $50,000 at 10% APR for 5 years (60 monthly payments):

1. Monthly rate: r = 0.10 ÷ 12 = 0.008333
2. Growth factor: (1 + 0.008333)^−60 ≈ 0.6078
3. Denominator: 1 − 0.6078 = 0.3922
4. Numerator: 50,000 × 0.008333 = 416.67
5. Payment: 416.67 ÷ 0.3922 ≈ $1,062.35 per month

Total repaid: $1,062.35 × 60 ≈ $63,741. Total interest: about $13,741.

You can sanity-check month one by hand: interest is $50,000 × 0.008333 = $416.67, so of the first $1,062.35 payment, $416.67 covers interest and $645.68 reduces principal. By the final year, those proportions have nearly reversed.

How term length changes total interest

Same $50,000 at 10% APR, three different terms:

Stretching from 3 to 7 years cuts the payment by nearly half — and roughly two-and-a-half-times the total interest. Neither choice is automatically right. A lower payment protects monthly cash flow and your debt-service coverage ratio, which lenders test before approving anything. The honest move is picking the shortest term whose payment your realistic cash flow covers with room to spare.

What the estimate doesn't include

The calculator models principal and interest only. Real offers often add:

• Origination fees, frequently deducted from proceeds — you repay $50,000 but receive less
• Closing, packaging, or guarantee fees (common on SBA products)
• Prepayment penalties or fixed-interest clauses that charge remaining interest even if you pay early
• Variable rates — the formula assumes your rate never changes; many loans float

Because fees vary, two loans with the same quoted interest rate can have very different true costs. That's the problem APR exists to solve — our guide to APR vs. interest rate explains the difference in detail.

Using the results to compare offers

The calculator earns its keep when offers arrive:

1. Run every offer through the same math. Enter each offer's amount, rate, and term, and compare total cost side by side — not just monthly payments.
2. Normalize to APR first. If an offer quotes a factor rate or a "simple interest" total, convert before comparing; the factor rate converter handles the trickiest case.
3. Add fees back in mentally. A loan with a lower rate but a large origination fee can cost more than its rival — ask every provider for the APR and total repayment figure in writing.
4. Test the payment against your cash flow. A payment you can only make in a good month isn't affordable. Our offer-comparison guide walks through the full checklist.

One formula, honestly applied, turns marketing language back into numbers — which is the entire point.