Business Loan
Estimate monthly payments, total interest, and amortization for business loans including SBA, term, and line of credit options
Formula
M = P[r(1+r)^n]/[(1+r)^n-1]
Standard amortization formula. Business loans typically have shorter terms than mortgages but longer than personal loans.
Worked Examples
Example 1: SBA 7(a) Loan
Problem:$250,000 SBA loan at 8% for 10 years for equipment and working capital.
Solution:Monthly payment calculation:\nP = $250,000, r = 8%/12 = 0.667%, n = 120\n\nPMT = $250,000 × [0.00667(1.00667)^120] / [(1.00667)^120 - 1]\nPMT = $3,033/month\n\nTotal payments: $3,033 × 120 = $363,960\nTotal interest: $363,960 - $250,000 = $113,960\n\nEffective cost: 45.6% of loan amount in interest
Result:$3,033/month | $113,960 total interest
Example 2: Compare Loan Terms
Problem:$100,000 loan at 10%. Compare 5-year vs 7-year term.
Solution:5-Year Term:\nPayment: $2,125/month\nTotal interest: $27,480\nTotal cost: $127,480\n\n7-Year Term:\nPayment: $1,661/month\nTotal interest: $39,497\nTotal cost: $139,497\n\nDifference:\n7-year saves $464/month\n7-year costs $12,017 more total\n\nChoose based on cash flow needs vs total cost tolerance.
Result:5-year saves $12K in interest
Example 3: Factor Rate vs APR
Problem:$50,000 from online lender. 1.25 factor rate, 12-month term. What's the real APR?
Solution:Factor rate calculation:\nTotal repayment: $50,000 × 1.25 = $62,500\nWeekly payment: $62,500 ÷ 52 = $1,202\nInterest: $12,500\n\nSimple interest: $12,500 ÷ $50,000 = 25%\n\nBUT - you're paying back principal over time.\nEffective APR is higher: ~45%\n\nFactor rates obscure true cost. Always calculate APR.
Result:1.25 factor ≈ 45% APR (not 25%!)
Frequently Asked Questions
What are typical business loan interest rates?
SBA loans: 6-9% (government-backed, lower risk). Bank term loans: 7-12% (traditional, good credit required). Online lenders: 10-30% (faster, easier approval, higher cost). Rates depend on credit score, revenue, time in business, and loan type.
How much can I borrow for my business?
Depends on loan type. SBA 7(a): up to $5 million. Bank term loan: varies by bank. Online lenders: typically $5,000-$500,000. Equipment financing: up to 100% of equipment value. Generally based on annual revenue (often 10-30% of revenue) and ability to repay.
What do I need to qualify for a business loan?
Typical requirements: 2+ years in business, $100K+ annual revenue, 650+ personal credit score, positive cash flow. SBA loans: business plan, collateral. Online lenders: often more flexible - 1 year, $50K revenue, 500+ credit. Requirements vary by lender.
What is an SBA 7(a) loan?
The most common SBA loan. Up to $5 million for working capital, equipment, real estate. 7-10 year terms for working capital, 25 years for real estate. Rates: Prime + 2.25-4.75%. Government guarantees 75-85%, reducing lender risk and enabling better terms.