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A business loan provides necessary financing business owners can use for everyday operations, working capital, purchasing equipment or inventory and paying other debts. Business loans come with various annual percentage rates (APRs), loan amounts and terms, which together result in different sized monthly payments.
Comparing these rates and terms can be a lot to sort through, especially if it’s complex to crunch the numbers. Our straightforward business loan calculator can help you estimate your monthly payments and help you make smart business decisions.
Business Loan Calculator
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How To Use This Business Loan Calculator
To use this business loan calculator, type in the amount you’ll need to borrow, the interest rate and the term (in months). Next, click submit to see your estimated monthly payment and total interest paid over the life of the loan.
Use the calculator to determine if you can afford the business loan you’re considering, or if you might need to find a less expensive option.
How To Get a Business Loan
Follow these five steps to get a business loan:
1. Check Your Eligibility
You’ll want to know your personal credit score, time in business and annual revenue when applying for a business loan. Traditional banks and lenders approved by the U.S. Small Business Administration (SBA) will typically require scores of at least 670; online banks may have more flexible requirements. And many lenders require you to have been in business for at least one or two years, and show $50,000 to $250,000 in annual revenue.
2. Determine What You Need to Finance
Most lenders will want to know the purpose of your loan. If you’re getting a business loan, it’s likely you want the funds to start your business, finance day-to-day operations or grow your current business. Your desired purpose will direct you toward the best lending product, such as an SBA loan, term loan, line of credit, invoice factoring or merchant cash advance.
3. Compare Business Lending Options
You have a couple of options when it comes to choosing a lender: You can choose a traditional lender, like a bank or credit union, or an online lender. Traditional lenders typically have more eligibility requirements but often have more affordable offers. Online lenders usually have more flexible requirements and quicker funding times, but it comes with more expensive options.
4. Gather the Required Documentation
Before you apply, check with your lender to learn about the required documents. Prepping these documents beforehand can make for a more seamless process. It’s likely you’ll need to provide business and personal tax returns and bank statements, business financial statements, business legal documents and your business plan.
5. Submit Your Application
Once you’re squared away with your documentation, it’s time to submit your application for the loan that offers you the best terms possible for your specific situation. The time it takes to hear whether you’ve been approved will vary by lender and by specific loan product, such as an SBA loan or business line of credit.
Business Loan APRs
Business loan APRs from banks or credit unions typically start at 3% but can go as high as 11%. However, online lenders may have rates that range from 7% to more than 100%, depending on the specific loan product.
APRs vary depending on your credit score, the amount you’re borrowing, the total repayment term and factors specific to your business like years in operation and annual revenue.
Related: Average Business Loan Rates: What Will You Be Charged?
Common Types of Business Loans & Lending Options
Business loans and lending options come in all shapes and sizes, and it’s crucial to understand each to determine which is best for your business. Here are common types of financing your business can use.
SBA Loans
The SBA guarantees loans, with terms and loan limits of up to 30 years and $5 million or more, to help business owners need financing to grow their businesses.
Most SBA loans come from SBA-approved lenders that are backed by guarantees of up to 85% of the amount borrowed. This means if you default on your loan, the government pays the lender the guaranteed amount. However, the SBA requires a personal guarantee as collateral from everyone with at least 20% ownership in a company. This means the SBA can repossess your personal assets to recoup its losses if you fail to repay.
The SBA offers the SBA 7(a), 504, CAPLines, Export, Microloan and Disaster loan programs. Among these programs, the 7(a) and 504 are the most popular, but the 7(a) is the SBA’s primary lending program.
Term Loans
Business term loans typically offer a one-time lump sum of cash, paid back monthly, to use for your business how you see fit. Compared to SBA loans, their terms aren’t as expansive but still provide a good chunk of change. For example, you’ll usually see terms and loan limits of up to 10 years and $500,000 or more.
Business owners can use term loans for a variety of purposes. For instance, you can use the funds to cover working capital needs, day-to-day operating expenses, inventory or equipment purchases or to pay off existing business debt.
Line of Credit
A business line of credit gives borrowers access to a set amount of money that they can borrow against in the future, instead of providing a one-time lump sum of cash. They are typically revolving, which means your credit line replenishes for a set period of time—usually up to five years—as long as you make payments and don’t go over your limit.
Lenders typically offer terms and credit limits of up to five years and between $1,000 and $250,000. You can use a business line of credit to fund day-to-day costs, short-term projects or surprise expenses—think of it as a rainy day fund.
Invoice Factoring
Invoice factoring is technically not a loan, but it is a financing option. Instead of receiving a lump sum of cash upfront, businesses can sell their unpaid invoices at a discount to a factoring company. You’ll typically receive an initial advance between 80% to 95% of your invoices and pay a factoring fee of up to 5%. The factoring company gets paid when it collects the invoices from your customers, typically in 30 to 90 days.
For example, let’s say you have $20,000 in unpaid invoices and sell them to an invoice factoring company that agrees to buy them for $19,400—$20,000 minus a 3% factoring fee ($600). If it offers to advance 85% of the invoices after the fee, you would receive $16,490. The company will then collect the invoices from your customers when they’re due and give you the remaining balance it owes you—$2,310 ($19,400 – $16,490 – $600).
Invoice factoring is typically best for businesses that have other businesses as customers. These customers usually don’t pay upfront, so invoice factoring can help you receive immediate cash to help cover working capital needs, day-to-day operating expenses and other business expenditures.
Merchant Cash Advance
Similar to invoice factoring, merchant cash advances (MCAs) aren’t considered a loan. MCAs are typically best for businesses that experience an influx of credit and debit card transactions because they let you borrow against your future sales.
MCA lenders offer limits anywhere between $5,000 to $200,000 and can provide funds within 24 hours. However, this type of business lending comes with a high price tag—you can expect factor rates between 1.2 to 1.5 of your total advance. For example, if your total advance is $70,000 with a factoring rate of 1.4, you would owe $28,000 in fees ($70,000 x 1.4), resulting in a total repayment of $98,000.
You can repay your MCA in one of two ways: You can repay based on a percentage of your average monthly sales or you can set up daily or weekly withdrawals based on an estimate of your monthly revenue.
Because of the high costs that come along with MCAs, they’re often considered a risky form of financing. You should consider all other options before relying on an MCA.
Equipment Financing
Equipment financing helps businesses purchase the equipment and machinery needed to start and maintain operations. You can typically use it for everything from office furniture and electronics to manufacturing equipment.
Equipment loans are collateralized by the equipment you’re purchasing, so the size of a loan depends on the value of the equipment and the size of the down payment. However, the best equipment financing companies offer terms and limits of up to 25 years and $1 million or more.
Find the Best Small Business Loans of 2023
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Business Loan Alternatives
A business loan isn’t your only option if you need money for your company. Here are a few other ideas that might work better for you.
1. Business Grant
Many organizations offer small business grants—free money that doesn’t have to be paid back like a loan. These grants might be easier to get if you’re starting up a small business that provides an important service for your community, or if you’re a minority business owner. Check with your local small business development council and national organizations that you might be a member of in order to find these opportunities.
2. Business Credit Card
If you only need a small amount of cash to cover budget shortfalls, or if you want a convenient way to make business purchases, a business credit card can be a good option. Many business credit cards also offer special rewards, such as cash back or points toward free travel. It’s best to use credit cards for short-term funding needs because interest fees can be expensive, although you won’t pay any interest if you pay the charges off in full each month.
3. Crowdfunding
If you’re just getting started and can’t get a business loan, crowdfunding can be a good way to raise funds and awareness about your business. Crowdfunding generally means asking for a donation, although you can choose to pay people back if you draw up a contract. Sites like GoFundMe also make it easy to raise funds, but they may take a cut out of your fundraising efforts.
Business Loan FAQs
How many years can you get a business loan for?
Business loans come with a range of terms, anywhere from three months to 25 years. The type of loan you open will determine what terms you have access to. For example, short-term loans will have shorter term lengths, like three to six months, and SBA loans boast terms of up to 25 years.
How much do I need to deposit for a business loan?
Your business loan down payment will depend on the type of loan you apply for. While some loans require no down payments, others require a deposit of 10% to 30% of your loan amount, depending on the loan type and purpose.
How much money can I borrow to buy a business?
If you’re looking to buy a business, you’ll typically need a business acquisition loan, which carry loan amounts ranging from $5,000 to $5 million.
Helping You Make Smart Loans Decisions
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FAQs
Business Loan Calculator: Estimate Your Payments? ›
Loan payment = Loan balance x (annual interest rate/12)
To break this example down further, do the following: Divide the annual interest rate of 6% (expressed as 0.6) by 12, for the number of months in the year. This yields a monthly interest rate of 0.5% (expressed as 0.005).
Loan payment = Loan balance x (annual interest rate/12)
To break this example down further, do the following: Divide the annual interest rate of 6% (expressed as 0.6) by 12, for the number of months in the year. This yields a monthly interest rate of 0.5% (expressed as 0.005).
Example Monthly Payments on a Million Dollar Business Loan
Business loan terms and payment amounts are variable based on terms and rates. Consider a $1M loan with an interest rate of 4% fixed for 20 years. The monthly payments on that business loan would be $4,774.15.
The cost of a $600,000 loan varies depending on your interest rate, fees and loan term. For example, let's say your loan came with a 9% APR and a 10-year term. This particular $600,000 loan would come with a $7,600.55 monthly payment and a total cost of $312,065.57 in interest and fees by the time your term is up.
How much is monthly payment on a $250000 for a business loan? ›The cost of your $250,000 loan depends on the rates, fees and loan terms your business receives. For example, a $250,000 loan with a 5% APR and a 10-year term would cost your business about $2,652 each month and a total of almost $68,197 in interest.
Do you pay business loans back monthly? ›Business term loans typically offer a one-time lump sum of cash, paid back monthly, to use for your business how you see fit.
What is the average length of a business loan? ›| Loan type | Repayment terms | Loan amounts |
|---|---|---|
| Term loans | Three months to 10 years | $5,000 to $1 million+ |
| SBA loans | Up to 25 years | Up to $5 million |
| Traditional bank loans | Three to 10 years | $250,000 to $1 million |
| Business lines of credit | Six months to five years | $1,000 to $250,000 |
Whether you need a long term loan, a line of credit or a business cash advance – $500,000 loans come in many flavors. But you generally need to be in business for one to two years with a minimum monthly revenue of $350K to qualify.
What is a realistic small business loan amount? ›The average small business loan amount is $663,000. The average small business loan amount from large national banks is $593,000. The average small business loan amount from small national banks is $146,000. The average SBA loan is $107,000.
Is it hard to get a small business loan? ›The level of difficulty a small business faces when applying for a loan depends on several factors, including its cash flow, time in business, credit score, business plan and desired loan amount. The more that a small business is able to prove that it is able to repay the loan, the easier it will be to get the loan.
How hard is it to get a $400,000 business loan? ›
A $400,000 business loan is a pretty substantial amount of money for a lender to risk loaning out to a borrower. Some lenders are going to want to see a credit score of at least 720 or higher. A score greater than 720 demonstrates that you have a solid history of making on-time payments and paying your debts.
How hard is it to get a 50000 business loan? ›It's often not difficult to get a $50,000 or $100,000 business loan if you have good credit and a solid business plan. There are hundreds of lenders throughout the U.S. that can provide unsecured small business loans.
Can you pay off a business loan early? ›Most online lenders will allow you to prepay an existing loan without a penalty. Some now also offer the ability to take out a loan with a prepayment option included. OnDeck, for example, now offers loans with prepayment options, where they waive 100% of remaining interest payments if you pay your loan off early.
How much credit should I have for a business loan? ›Banks and credit unions: A credit score of 700 or higher is ideal for a bank or credit union business loan. If you can reach a score of 740 or higher, you'll likely get approved for the best terms the lender offers. SBA lenders: Aim for a credit score in the mid-600s to qualify for an SBA term loan.
How much of a business loan can I get to start a business? ›How much of a business loan you can get depends on your business's annual gross sales, creditworthiness, current debts, the type of financing, and the chosen lender. In general, lenders will only provide loans up to 10% to 30% of your annual revenue to ensure you have the means for repayment.
What is the monthly payment on a 2 million dollar loan? ›What Is the Monthly Mortgage Payment for a $2 Million Home? The national average for a 30-year fixed-rate jumbo loan mortgage is around 3.5%. At that rate, the monthly mortgage payment for a $2 million home will be around $7,800 per month, with a 20% down payment.
How fast should a business pay for itself? ›Two to three years is the standard estimation for how long it takes a business to be profitable. That said, each startup has different initial costs and ways of measuring business profitability. A business could have enough cash to become profitable immediately or take three years or longer to make money.
How soon do you start paying back a business loan? ›Usually, you can expect to repay a long-term business loan monthly or bimonthly. So your payments could start in as little as a few weeks after taking the loan. That's one of the characteristics that make these loans more desirable.
How long to close on a small business loan? ›The loan is closed (generally takes seven to 14 days, though some banks warn it could take up to 90 days). During this period, the lender should be in touch with the small-business owner and give them a heads-up if there are any issues.
What is the easiest loan to be approved for? ›The easiest loans to get approved for are payday loans, car title loans, pawnshop loans and personal loans with no credit check. These types of loans offer quick funding and have minimal requirements, so they're available to people with bad credit.
Can I get a business loan without revenue? ›
Some equipment financing lenders (though not all) are willing to work with startups. These lenders may have no minimum monthly revenue requirements and no minimum time in business requirements for applicants to satisfy. The collateral your business is purchasing secures the loan and reduces the risk for the lender.
Do banks give loans to startups? ›So yes, banks do make loans to startups – provided they demonstrate the ability to repay them. Generally, that means: Strong collateral. Lenders expect borrowers to put up something – usually their home or other significant asset.
What disqualifies you from getting an SBA loan? ›Ineligible businesses include those engaged in illegal activities, loan packaging, speculation, multi-sales distribution, gambling, investment or lending, or where the owner is on parole.
How does a startup business loan work? ›Startup loans ultimately work like any other business loan: You apply for funding, a lender assesses your creditworthiness and if your loan is approved, you repay the funds with interest. Startup loans may offer more lenient requirements in some respects, such as accepting borrowers with low revenue streams.
How long does it take to fund a small business loan? ›The SBA promises a turnaround time of 36 hours for their express loans. But, that doesn't include the time it takes for the lender to approve the loan, which could tack on another few weeks. So, instead of 60-90 days, you're looking at 30-60 days for the SBA loan processing time when all is said and done.
How long does it take a bank to approve a small business loan? ›The SBA loan approval process takes 30 to 90 days from application to funding.
How long do small business loans take to process? ›Approval for this type of loan usually comes within 30 to 90 days. SBA 504/CDC loan: This type of loan is backed by the SBA and funded through certified development companies (CDCs). It typically takes 30 to 45 days to receive SBA approval.
Which bank is best for a business loan? ›- HDFC Bank Business Loan. Eligibility Criteria. ...
- Axis Bank Business Loan. Eligibility Criteria. ...
- ICICI Bank Business Loan. Eligible Parties. ...
- Kotak Bank Business Loan. ...
- IDFC First Bank Business Loan. ...
- SBI Business Loan. ...
- Citibank Business Loan. ...
- Bajaj Finserv Loan.
SBA Express
This term loan or line of credit offers fixed or variable SBA loan rates as well as the easiest SBA application process, quick approval times, flexible terms, and lower down payment requirements than conventional loans.
How much would a monthly payment be on a $50,000 personal loan? If you take a $50,000 personal loan at a 6.99% interest rate and a 12-year repayment term your monthly payment should be around $462. If you take the full 12 years to repay the loan you should pay about $16,556 in interest.
Do business loans go off your credit? ›
Business loans do not typically show up on your personal credit report unless the bank reports it to credit bureaus as personal lending under your social security number. Normally, your personal credit report shouldn't be impacted by a business loan, even if you've personally guaranteed the loan.
Is paying off a business loan an expense? ›Interest paid on your business loan is tax-deductible in most cases. Specifically, you can write the interest portion of your payments off as a business expense.
Can you use a business loan to pay personal bills? ›Can you use a business loan for personal use? Short answer: no. Business loans can only be used to provide funding for your business. This means you cannot use the capital generated from a business loan to pay off personal debt or make personal purchases.
What is a bad credit score for a business? ›According to Equifax, a business credit score varies on a scale between 0 – 1200, with 0 is the lowest and 1200 the highest business credit score. As a general rule of thumb, a good business credit score is somewhere between 622 – 725. A very good business credit score is between 726 – 832.
What is poor business credit score? ›| Paydex Range: | Rating: |
|---|---|
| 80 – 100 | Good |
| 50 – 79 | Fair |
| 0 – 49 | Bad |
Business Credit Risk Score
Businesses are ranked on a scale between 101 to 992, with a lower score correlating to a higher risk of delinquency. A good Business Credit Risk Score is around 700 or higher.
You can borrow $50,000 - $100,000+ with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
How much do you have to make a year to afford a $400000 house? ›Assuming a 30-year fixed conventional mortgage and a 20 percent down payment of $80,000, with a high 6.88 percent interest rate, borrowers must earn a minimum of $105,864 each year to afford a home priced at $400,000.
How much income do I need for a 1.5 million house? ›Experts suggest you might need an annual income between $100,000 to $225,000, depending on your financial profile, in order to afford a $1 million home. Your debt-to-income ratio (DTI), credit score, down payment and interest rate all factor into what you can afford.
How much house can I get for $3000 a month? ›For example, if you make $3,000 a month ($36,000 a year), you can afford a mortgage with a monthly payment no higher than $1,080 ($3,000 x 0.36). Your total household expense should not exceed $1,290 a month ($3,000 x 0.43). How much house can I afford with an FHA loan?
What is the formula for calculating loan payments? ›
So, to get your monthly loan payment, you must divide your interest rate by 12. Whatever figure you get, multiply it by your principal. A simpler way to look at it is monthly payment = principal x (interest rate / 12). The formula might seem complex, but it doesn't have to be.
How do you calculate loan payments? ›Divide the interest rate you're being charged by the number of payments you'll make each year, usually 12 months. Multiply that figure by the initial balance of your loan, which should start at the full amount you borrowed.
What is the formula for loan calculation? ›You can calculate your total interest by using this formula: Principal loan amount x interest rate x loan term = interest.
How much would a 5000 loan cost per month? ›Based on the OneMain personal loan calculator, a $5,000 loan with a 25% APR and a 60-month term length would be $147 per month. The loan terms you receive will depend on your credit profile, including credit history, income, debts and if you secure it with collateral like a car or truck.
What are the 4 C's of lending? ›Standards may differ from lender to lender, but there are four core components — the four C's — that lender will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.
What would be the monthly payment on a $40000 loan? ›If you take a loan for five years and your interest rate is 4%, your monthly payment for a $40,000 loan will be $737.
How do you calculate monthly installment of a loan? ›- Formula for EMI Calculation is -
- P x R x (1+R)^N / [(1+R)^N-1] where-
- P = Principal loan amount.
- N = Loan tenure in months.
- R = Monthly interest rate.
- R = Annual Rate of interest/12/100.
For example, the interest on a $30,000, 36-month loan at 6% is $2,856.
How to calculate loan repayment schedule? ›Starting in month one, take the total amount of the loan and multiply it by the interest rate on the loan. Then for a loan with monthly repayments, divide the result by 12 to get your monthly interest. Subtract the interest from the total monthly payment, and the remaining amount is what goes toward principal.
What is the Excel formula for calculating a loan payment? ›- The rate argument is the interest rate per period for the loan. For example, in this formula the 17% annual interest rate is divided by 12, the number of months in a year.
- The NPER argument of 2*12 is the total number of payment periods for the loan.
- The PV or present value argument is 5400.
How do you calculate annual installment payments? ›
The EMI amount is calculated by adding the total principal of the loan and the total interest on the principal together, then dividing the sum by the number of EMI payments, which is the number of months during the loan term. For example, a borrower takes a $100,000 loan with a 6% annual interest rate for three years.
What is the monthly payment on a 200k loan? ›On a $200,000, 30-year mortgage with a 4% fixed interest rate, your monthly payment would come out to $954.83 — not including taxes or insurance. But these can vary greatly depending on your insurance policy, loan type, down payment size, and more.