πΌ Business Loan Calculator
Monthly payment, total interest, and amortization for business term loans.
Monthly Payment
Estimates for planning only, not financial advice.
How to Use This Calculator
This calculator estimates the monthly payment, total interest, and payoff timeline for a business term loan, including the origination fee most calculators ignore. Enter the loan amount, APR, and term, then compare the same loan at different terms or add an extra principal payment to see the interest savings.
Enter the Loan Amount you plan to borrow and the APR from your term sheet. Business term loans typically quote a fixed APR, so enter it as a plain number like 8 for 8 percent.
Pick the Term (1 to 10 years) and enter the Origination Fee as a percent of the loan. A 3 percent fee on $250,000 is $7,500 that comes straight off what you actually receive.
Optionally add an Extra Principal amount per month. This is the classic cash-flow strategy: take the longer term for safety, then pay extra in strong months.
Read the results and download the year-by-year schedule as CSV. The schedule shows how much of each year goes to interest versus principal, which your accountant will want at tax time.
The Business Loan Payment Formula
The math is identical to a mortgage or car loan: a fixed payment each month, with interest calculated on the remaining balance and the remainder applied to principal. The difference is in the terms, not the formula. A 5-year business loan at 8 percent concentrates a huge amount of interest into the first two years, so the schedule matters more than the headline rate. The origination fee works like extra interest: if you borrow $250,000 with a 3 percent fee, you receive $242,500 but make payments as if you received the full amount, which pushes the true cost above the quoted APR.
Worked Example
Borrow $250,000 at 8 percent APR for 5 years (60 months). The monthly rate is 0.08 / 12 = 0.006667. Payment = 250000 x 0.006667 x (1.006667)^60 / ((1.006667)^60 - 1) = $5,069.10 per month. Total paid = $5,069.10 x 60 = $304,146, so total interest = $54,146. Now add $500 a month of extra principal: the loan pays off in 54 months instead of 60, and total interest drops to about $48,077, saving roughly $6,069. That is a 6-month early payoff for a habit that costs one good week of revenue.
Choosing the Right Term for Your Business
The right term is a cash-flow decision, not a math contest. A 3-year term on $250,000 at 8 percent costs about $7,829 a month and $31,800 in total interest, while a 7-year term costs about $3,891 a month but $76,800 in interest. If your monthly operating profit is $6,000, the 3-year loan is mathematically cheaper but leaves almost nothing for a bad month, and most lenders want to see a debt-service coverage ratio of at least 1.25, meaning income at least 25 percent above the payment. The longer term with voluntary extra payments is usually the safer way to capture most of the savings without the risk.
Watch for the fine print that changes the real cost: origination fees, prepayment penalties, and variable-rate clauses. A "low" quoted rate with a 4 percent origination fee and a prepayment penalty can cost more than a plain loan at a higher rate. Always compare the total interest plus fees from the amortization schedule, never the APR alone.
Estimates for planning only, not financial advice.
Frequently Asked Questions
How is a business loan payment calculated?
Business term loans use the same amortization formula as any installment loan: Payment = P x r x (1+r)^n / ((1+r)^n - 1), where P is the amount borrowed, r the monthly rate, and n the number of payments. Each payment covers that month's interest first and the rest reduces principal. Business rates are usually higher than mortgage rates because lenders take on more risk with commercial borrowers.
What is a typical business loan rate and term?
Online and bank term loans commonly run 6 to 12 percent APR for strong borrowers, with terms of 1 to 5 years, while SBA loans can stretch to 10 years for working capital or 25 years for commercial real estate. Shorter terms mean higher payments but much less total interest. Run the same loan amount at 3, 5, and 7 years in this calculator to see the trade-off in dollars.
Should I include the origination fee in the loan amount?
Yes, because the origination fee is real money out of your pocket, usually 1 to 5 percent of the loan. If the lender deducts a 3 percent fee from a $100,000 loan, you only receive $97,000 but still pay interest on $100,000. This calculator lets you enter the fee separately so you can see its effect on the effective rate, which is higher than the quoted APR.
Is a shorter term always better?
Not always. A shorter term cuts total interest dramatically, but it raises the monthly payment, which can strain cash flow during a slow quarter. Many business owners pick a slightly longer term for safety and then make extra principal payments when revenue is strong. The extra-payment option in this calculator shows exactly how much interest that strategy saves.
How do lenders decide if I qualify?
Most lenders look at your debt-service coverage ratio, which is your annual net operating income divided by your annual loan payments. A ratio of 1.25 or higher is the common minimum, meaning the business earns 25 percent more than it needs for the payments. This calculator's payment number feeds straight into that ratio, so you can test affordability before you apply.