Business Loan Calculator: Estimate Your Payments

Business Loan Calculator: Estimate Your Payments

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.

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.

Business Loan Calculator

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 financing for. 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.