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Loan Payment Calculator
Our loan payment calculator can help you determine your monthly payment amount if you were to take out a business loan.
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If you’re considering applying for a business loan, we recommend using our loan payment calculator to determine what funding amount aligns with your business’s financial capacity. This tool helps you project your monthly loan payment based on the loan amount, repayment period and interest rate. Read on to learn how to use this calculator effectively and understand the key factors that influence loan approvals and interest rates.
Key terms when using the loan payment calculator
When using our loan payment calculator, it’s essential to understand these key terms:
- Loan amount: The principal amount you want to borrow
- Term of loan: The number of months over which you plan to repay the loan, from 1 to 360
- Annual interest rate: The annual interest rate charged by the lender, from 0 to 40%
- Payment: The amount you’ll pay each month to repay the loan
- Balance: The amount remaining after each monthly payment
- Interest: The amount you’ll pay in interest over the life of the loan
What determines the monthly loan payment on a business loan?
The monthly loan payment on a business loan is calculated using a standard amortization formula that takes into account the loan amount, interest rate and loan term. This calculation distributes both the principal (the amount you borrowed) and interest across equal monthly installments throughout the loan term to determine your fixed monthly payment amount. While specific loan repayment terms can vary by lender, our loan payment calculator provides reliable estimates of your monthly loan payment based on the parameters you input.
What determines whether someone is likely to be approved for a business loan?
Lenders evaluate multiple criteria when determining whether to approve someone for a business loan. These key factors include your credit score, business financials (including cash flow) and collateral. Lenders also assess your debt service coverage ratio, which compares your business’s operating income to its total debt obligations, and the loan-to-value ratio; both are critical factors in determining loan eligibility and interest rates.
The documentation required when applying for one of the best business loans typically includes bank statements from a business bank account, tax returns, financial statements, articles of incorporation or operating agreements, asset statements, leases and the business owner’s personal financial records. Lenders perform comprehensive due diligence to assess the potential risks before approving your loan application.
What is the average interest rate on a business loan?
The interest rate on a business loan can vary widely depending on factors like the lender, the type of loan and your creditworthiness.
According to Lendio, small business loans in Q4 of 2024 have interest rates that vary between 10 and 40 percent, depending on the loan type. For example, interest rate on terms loans range from 10 to 28 percent, while interest rates on SBA loans range from 10.25 to 15.25 percent
It’s worth noting many lenders don’t disclose the top of their interest rate range. Additionally, applicants with lower credit scores may face significantly higher interest rates. Interest rates fluctuate based on the Federal Reserve’s benchmark rates, which have remained elevated to combat inflation.
It’s also crucial to understand that business loans may come with various types of interest rates. An APR (annual percentage rate) is a commonly used measurement that factors in any additional fees on top of the regular interest. Some alternative lenders may use a factor rate, expressed as a decimal that multiplies your loan amount to determine the total repayment, which can result in higher effective interest rates than traditional APR-based loans.