Understanding Your Business Loan Options and Costs

Securing financing is a critical step for growing a business, whether you're funding an expansion, purchasing equipment, or managing cash flow. Our Business Loan Calculator is designed to provide clarity on the most important aspect of a loan: its true cost. By going beyond a simple monthly payment, it helps you compare loan offers and plan your financial future with confidence.

Key Terms in a Business Loan

To use this calculator effectively, it's helpful to understand the core components of a business loan:

• Loan Amount (Principal): The total amount of money you are borrowing.
• Annual Interest Rate: The percentage of the principal charged by the lender for the use of its money, expressed as a yearly rate. Note this is different from the APR.
• Loan Term: The duration over which the loan is scheduled to be repaid. Common terms for business loans range from 1 to 10 years, or even longer for real estate.
• Origination Fee: A one-time fee charged by the lender for processing the loan application. It's typically a percentage of the total loan amount and is either paid upfront or rolled into the loan itself. Our calculator treats it as an additional cost to show you the full financial impact.

APR vs. Interest Rate: What's the Difference?

The Annual Percentage Rate (APR) represents the true yearly cost of a loan because it includes the interest rate *plus* all associated fees, like the origination fee. The interest rate only reflects the cost of borrowing the money. When comparing loan offers, the APR provides a more accurate, apples-to-apples comparison of which loan is actually cheaper.

How to Use the Amortization Schedule

The month-by-month amortization schedule generated by our calculator is a powerful tool for business planning:

• Financial Forecasting: It shows you exactly how much of each payment goes towards interest (an expense) versus principal (reducing a liability). This is crucial for accurate bookkeeping and financial statements.
• Prepayment Strategy: You can see the impact of making extra payments. Every additional dollar you pay toward the principal directly reduces the amount of future interest you will pay, shortening the life of the loan.
• Cash Flow Management: You have a clear, predictable schedule of payments, which is essential for managing your business's monthly and annual budgets.

Whether you're considering a Term Loan, an SBA Loan, or another form of financing, use this calculator to demystify the numbers and make a decision that aligns with your company's financial goals.