How to use the business loan calculator
- Enter the loan amount your business is borrowing.
- Enter the annual interest rate from the offer.
- Enter the loan term in years and choose how often you pay: monthly, every two weeks, or weekly.
- Enter the origination fee as a percentage of the loan, if any.
- Add other upfront fees in dollars, such as packaging, closing or guarantee fees.
- Read the payment per period, the total interest, the total cost of borrowing and the effective APR.
How the payment and APR are calculated
The calculator uses standard amortization at the payment frequency you choose. The rate per period is the annual rate divided by the number of payments in a year.
The fees are assumed to be paid at closing, so your business receives the loan amount minus the fees but repays the full amount. The effective APR is the periodic rate x at which the payments are worth exactly the cash you received, times the number of periods in a year. The calculator finds x by bisection, halving the search range until the two sides agree.
Worked example
The defaults are $100,000 at 9% for 5 years, paid monthly, with a 2.5% origination fee and $500 of other fees:
- Rate per month: 0.09 ÷ 12 = 0.0075, and N = 60 payments
- (1.0075)^60 = 1.56568
- Payment: 100,000 × 0.0075 × 1.56568 ÷ 0.56568 = $2,075.84
- Total of payments: $124,550.13, so the interest is $24,550.13
- Fees: 2.5% × $100,000 + $500 = $3,000, so you receive $97,000
- Total cost of borrowing: $24,550.13 + $3,000 = $27,550.13
- Effective APR: the rate at which 60 payments of $2,075.84 are worth $97,000 is 10.31%
Monthly, biweekly or weekly payments
Some lenders, especially online lenders, collect payments every week or every business day straight from your bank account. The same $100,000 loan at 9% over 5 years with $3,000 of fees:
| Payment schedule | Payment | Total interest | APR with fees |
|---|---|---|---|
| Monthly (60) | $2,075.84 | $24,550.13 | 10.31% |
| Every two weeks (130) | $956.55 | $24,351.92 | 10.32% |
| Weekly (260) | $477.95 | $24,266.90 | 10.32% |
More frequent payments save a little interest because the balance falls sooner, but they take money out of your account more often. Make sure your cash flow can cover a weekly draw in slow weeks, not just on average.
Watch for factor rates and short terms
Merchant cash advances and some short-term loans quote a factor rate, such as 1.2, instead of an interest rate. A factor of 1.2 on $50,000 means you repay $60,000 in total, but that $10,000 is not a 20% annual rate: repaid over six months it works out far higher. To compare offers fairly, turn every quote into total cost in dollars and an APR. If you know the payment but not the rate, the interest rate calculator finds it, and the APR calculator shows the effect of fees on a monthly loan.
Frequently asked questions
What does a business loan cost besides interest?
Common extras are an origination or underwriting fee (often a percentage of the loan), packaging or documentation fees, guarantee fees on government-backed loans, and sometimes a prepayment penalty. Ask the lender for every fee in writing and enter the total here.
Why is the APR higher than the interest rate?
Because the fees reduce the cash you actually receive while the payments stay the same. In the example, $3,000 of fees on a 9% loan raise the effective APR to 10.31%. A shorter term raises it further, since the fees are spread over fewer payments.
Is interest on a business loan tax-deductible?
Business interest is generally deductible as a business expense in the US, but there are limits, and the rules depend on your business structure and size. Ask a tax professional or see the IRS guidance on business expenses before you count on the deduction.
Can I pay off a business loan early?
It depends on the agreement. Some loans charge a prepayment penalty, and loans priced with a factor rate often require the full repayment amount however early you pay. On an amortizing loan with no penalty, paying early saves the interest you would have paid later.
Related calculators
- Loan Calculator — Monthly payment, total interest and a full amortization schedule, plus what extra payments save.
- APR Calculator — True annual percentage rate of a loan once upfront fees and points are included, paid in cash or financed.
- Payment Calculator — Monthly payment for a loan with a fixed term, or how long a fixed monthly payment takes to clear it.
- Amortization Calculator — Loan amortization schedule by year, with the payoff date and what an extra monthly payment saves.
Results are estimates for educational purposes and are not financial, tax or legal advice. See our disclaimer.