The formula
How it works
Estimate the monthly payment and true cost of a business loan, including any origination fee. Knowing the full cost helps you judge whether the loan will pay for itself through the growth it funds.
FAQ
What is an origination fee?
It is an upfront charge for setting up the loan, usually a percentage of the amount borrowed. It is deducted from the funds you receive or added to the balance, so it raises the real cost above the headline interest rate.
How do I know if a business loan is worth it?
Compare the total cost of the loan with the extra profit the borrowed money is expected to generate. If the return on that investment comfortably beats the loan’s cost, borrowing can make sense.
What is the difference between the interest rate and the APR?
The interest rate covers only the cost of borrowing the money, while the APR folds in the origination fee and other charges to show the true annual cost. Comparing APRs is a fairer way to shop between lenders than comparing rates alone.
Should I choose a fixed or variable rate?
A fixed rate keeps your payment the same for the life of the loan, which makes budgeting easier. A variable rate can start lower but moves with the market, so your payment could rise later.
Does a longer loan term always cost more?
Stretching the term lowers the monthly payment but increases the total interest paid, since you carry the balance longer. Shortening the term raises the payment but reduces the overall cost of borrowing.
Will I need a personal guarantee for a business loan?
Many lenders require a personal guarantee, especially for newer or smaller businesses, meaning you are personally liable if the business cannot repay. Established businesses with strong revenue and collateral are more likely to qualify without one.
Can I pay off a business loan early?
Many business loans allow early repayment, though some charge a prepayment penalty to offset the interest the lender loses. Paying off early only saves money once you check the loan terms for that fee.
About the business loan calculator
This calculator estimates the monthly payment and total cost of a business loan, including an origination fee. Businesses borrow to buy equipment, fund inventory, expand premises or smooth cash flow, and the decision hinges on whether the loan’s cost is outweighed by the value it creates. By laying out the payment, the total interest and the upfront fee, this tool shows the real price of the finance.
How to use it
Enter the loan amount, the interest rate, the term in years, and any origination fee as a percentage. The calculator returns the monthly payment, the total interest, the fee in money, and the overall cost of borrowing. For example, a $100,000 loan at 8% over 7 years costs about $1,560 a month, with roughly $31,000 of interest plus a $2,000 fee. Adjust the term to trade a lower payment against more total interest.
The formula
The monthly payment follows the amortization formula, , where is the loan amount, is the monthly rate and is the number of payments. Total interest is the sum of the payments minus the amount borrowed, and the origination fee is added on top to give the full cost of the finance — the number to compare against the return the loan will generate.
Where it is used
Business owners use it to budget repayments and to compare finance offers, weighing the monthly commitment against expected cash flow. Lenders and brokers quote payments from the same formula, and it underpins the analysis behind equipment finance, working-capital loans and SBA loans. Comparing the total cost — interest plus fees — against the return on the investment is the heart of any borrowing decision.