Business Loan Calculator
With loan amount 150000 usd, interest rate 10.5 percent, term 10 years, origination and guarantee fees 3 percent and 2 more fields, business loan comes to $2,024.02 — monthly payment. It is reached in 9 steps, the last of which is 150000 * 0.00875 / (1 - pow(1 + 0.00875, -120)), and each one is printed on the page with its numbers filled in. The formula is the one published by US Small Business Administration, not an approximation fitted to it.
Payment and true cost of a business loan once origination and packaging fees are taken out of the amount that actually lands in the account.
Formula and sources checked · How we check
Loan amount 150000, Interest rate 10.5, Term 10 years, Origination and guarantee fees 3
$2,024.02
Monthly payment for the example below. Editing a field recomputes the calculator below; this figure holds the answer the page was loaded with.
It is written into the HTML rather than drawn by a script, so a search engine reading this page without running JavaScript still finds an answer.
- Fees deducted at closing
150000 * 3 / 100 + 2500$7,000- Cash that reaches the business
max(0, 150000 - 7000)$143,000- Monthly payment
150000 * 0.00875 / (1 - pow(1 + 0.00875, -120))$2,024- Total of payments
2024.025 * 120$242,883- Interest
242882.99 - 150000$92,883- Interest plus fees
92882.994 + 7000$99,883- Annualised cost against cash received
99882.994 / 143000 / 10 * 1006.985 %- Debt service coverage ratio
12000 / 2024.0255.929- Monthly profit after the payment
12000 - 2024.025$9,976
Worked example
$150,000 at 10.5% over ten years is $2,024.02 a month. Take 3% in fees and $2,500 of closing costs off the top and $143,000 reaches the account, so the $99,883 of interest and fees is 6.98% a year against the cash actually received. At $12,000 of monthly profit the coverage ratio is 5.93, comfortably above the 1.25 lenders underwrite to.
How to work it out yourself
- 1.Borrow for the fees as well as the project. A $150,000 loan with 3% in fees and $2,500 of closing costs puts $143,000 in the account, and a plan built on the headline figure is short from day one.
- 2.Lenders underwrite on coverage, not on profit. A ratio of 1.25 is the usual floor — profit at least a quarter above the payment — and a ratio near 1.0 gets declined however good the story is.
- 3.Compare offers on the annualised cost line rather than the quoted rate. A short-term product at a low nominal rate with 5% taken off the top is dearer than it looks, and a merchant cash advance quoted as a factor rate is dearer again.
Payment and cost by term
| Term (years) | Monthly payment | Monthly payment | Interest |
|---|---|---|---|
| 1 | $13,222.29 | $13,222 | $8,667 |
| 2 | $6,956.41 | $6,956 | $16,954 |
| 3 | $4,875.37 | $4,875 | $25,513 |
| 5 | $3,224.09 | $3,224 | $43,445 |
| 7 | $2,529.10 | $2,529 | $62,444 |
| 10 | $2,024.02 | $2,024 | $92,883 |
| 25 | $1,416.27 | $1,416 | $274,882 |
The formula
- Fees deducted at closing
150000 * 3 / 100 + 2500 - Cash that reaches the business
max(0, 150000 - 7000) - Monthly payment
150000 * 0.00875 / (1 - pow(1 + 0.00875, -120)) - Total of payments
2024.025 * 120 - Interest
242882.99 - 150000 - Interest plus fees
92882.994 + 7000 - Annualised cost against cash received
99882.994 / 143000 / 10 * 100 - Debt service coverage ratio
12000 / 2024.025 - Monthly profit after the payment
12000 - 2024.025
Source: US Small Business Administration — 7(a) loans, SBA — terms, conditions and eligibility, Federal Reserve E.2 — survey of terms of business lending
Questions people actually ask
- What is a debt service coverage ratio?
- Monthly operating profit divided by the loan payment. Most SBA lenders want at least 1.25, meaning profit covers the payment with a quarter to spare. Below 1.0 the loan does not service itself and the application fails underwriting.
- What fees come with an SBA loan?
- A guarantee fee charged on the guaranteed portion, rising with loan size and term, plus the lender’s packaging, closing and third-party costs — appraisal, environmental, title. Together they commonly run 2-4% of the loan, taken at closing rather than billed later.
- Is a term loan cheaper than a merchant cash advance?
- Almost always. An advance quoted as a 1.3 factor rate on a nine-month remittance is an annualised cost well into the double digits above any term loan, because the whole 30% is charged over less than a year. Convert every offer to a cost per year on the cash received before comparing.
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