Business Loan Calculator

Business loans and SBA loans, in brief

A business loan gives you a lump sum you repay with interest over a fixed term — the classic amortizing term loan this calculator models. The most common small-business version is the SBA loan, where the U.S. Small Business Administration guarantees part of a bank loan, letting lenders offer lower down payments and longer terms than they otherwise would. Term loans, SBA 7(a) and 504 loans, and most equipment and commercial real-estate loans all amortize the same way, so the math here applies to each.

How loan payments are calculated

• Monthly payment = P × r ÷ (1 − (1 + r)^−n)
• r = annual rate ÷ 12; n = term in months
• Total interest = (payment × n) − loan amount

A worked example

A $250,000 loan at 10.5% over 10 years works out to a monthly payment of about $3,372, roughly $40,500 a year in debt service. Over the full term you'd repay about $404,700 — around $154,700 of it interest.

How loan amortization works

Amortization is how a loan is paid down on a fixed schedule. Each payment is split between interest (charged on the remaining balance) and principal (which reduces it). Early on, most of the payment is interest; as the balance shrinks, more goes to principal — which is why the balance falls slowly at first and faster later. The chart above shows that declining balance year by year, the same view an amortization schedule gives lenders.

SBA loan rates and terms

SBA 7(a) rates are usually set as the prime rate plus a lender spread — commonly 2.75% to 4.75% — so they move with prime. Terms run up to 10 years for working capital and equipment and up to 25 years for real estate. A longer term lowers the monthly payment but increases the total interest you pay, so the right term balances an affordable payment against total cost. Enter different rates and terms above to see the trade-off in real time.

How much can you borrow?

Lenders don't lend against a number you pick — they lend against cash flow. The key test is whether your income covers the new payment with room to spare, measured by the debt service coverage ratio (lenders typically want at least 1.25×). Credit history, collateral, your own capital injection, and a solid business plan round out the decision. If the payment shown above would push your coverage below the threshold, borrow less, extend the term, or grow income first.

What borrowers overlook

• Shopping on the monthly payment alone. A lower payment from a longer term can cost far more in total interest — compare total repaid, not just the monthly.
• Ignoring fees. SBA guarantee fees, packaging, and closing costs add to the real cost of borrowing beyond the headline rate.
• Confusing interest rate with APR. APR folds fees into an annualized rate and is the fairer way to compare offers.
• Borrowing for the wrong term. Match the term to the life of what it funds — don't finance short-lived inventory over ten years.

Knowing the payment is half the picture: lenders also check that your cash flow covers it. Pressure-test that with the DSCR calculator, and see how the loan fits a full application in our guide to writing a business plan for an SBA loan.