Business Loan Calculator

Business Loan Calculator

Business loans are exactly what they sound like—funds borrowed specifically to support business activities. Like other types of loans, business loans require repayment of both the original amount (principal) and the interest. Most often, borrowers make monthly payments, though some loans may call for weekly, daily, or even interest-only payments. A few types require full repayment when the loan term ends.

There are several kinds of business loans available, each tailored to different needs. Below is a breakdown of common business loan options available in the United States:

SBA Loans

SBA loans, backed by the U.S. Small Business Administration, are designed to help a wide range of businesses access financing. Depending on the loan type, funds can be used for:

• Starting a business

• Acquiring another business

• Expanding working capital

• Purchasing real estate

• Franchise funding

• Refinancing debt

• Business improvements and renovations

It’s important to note that the government doesn’t directly lend the money. Instead, banks, community organizations, and other financial institutions provide the funds, with the SBA guaranteeing 75% to 90% of the loan in case of default. This government backing reduces risk for lenders but usually means more paperwork, longer approval times, stricter rules, and loan caps that may not cover larger financial needs.

Types of SBA Loans

7(a) Loan Program
The 7(a) loan is the most common SBA loan, making up over 75% of all SBA-backed financing. These versatile loans can be used for working capital, purchasing real estate, machinery, equipment, or refinancing existing debt. Borrowers can secure loans up to $5 million, with repayment terms of up to 10 years for working capital or 25 years for fixed assets.

Microloans
Ideal for startups and small growing businesses, SBA microloans offer funding up to $50,000, with an average loan size around $15,000. Microloans can be used for most business needs, except for buying real estate or paying off existing debt. Loan terms can extend up to six years.

CDC/504 Loans (Real Estate & Equipment Financing)
These loans offer long-term, fixed-rate funding for purchasing real estate, large equipment, or refinancing debt. Borrowers cannot use CDC/504 loans for working capital or buying inventory. Maximum loans can reach $5.5 million with repayment terms of 10, 20, or 25 years.

Disaster Loans
Businesses impacted by declared disasters—like earthquakes, floods, hurricanes, fires, or civil unrest—can apply for disaster loans. Funds can cover repairs to buildings, machinery, equipment, inventory, or other business assets, with loans available up to $2 million.

Other Types of Business Loans

Conventional Business Loans
Conventional loans come directly from banks or private lenders without any government guarantee. These typically have higher interest rates and shorter terms compared to SBA loans. For businesses with lower credit scores, SBA loans might be a better option. However, borrowers with strong credit may find conventional loans attractive due to faster approval processes and fewer restrictions.

Banks offer several types of conventional loans, including:

• Asset-based financing

• Invoice financing

• Business cash advances

• Mezzanine financing

• Cash flow loans

Personal Loans for Business
In some cases, entrepreneurs turn to personal loans to fund a business, especially when traditional business loans are too costly or unavailable. This can be a useful option for newer businesses without an established financial track record. You can use our Personal Loan Calculator for more details and personalized calculations.

Interest-Only Loans
Interest-only loans allow borrowers to make payments covering only the interest during the term. The full principal balance is due at the end of the loan. These loans can help businesses manage cash flow when they expect to earn more income later.

Common Business Loan Fees

Similar to other types of financing, business loans often come with additional fees aside from interest charges. These fees cover administrative costs like verifying applications and processing documents. The two most frequent charges are:

Origination Fee
This fee covers the cost of processing and approving the loan. Lenders may charge a flat rate or a percentage (typically between 1% and 6%) of the loan amount. Origination fees are often added into the loan balance.

Documentation Fee
This fee pays for the paperwork and documentation involved in setting up the loan.

Other potential fees could include:

• Application fees

• Monthly service fees

• Annual fees

• Prepayment penalties

• Referral fees

• Late payment charges

• Wire transfer fees

Not every lender charges every fee, and some, like late payment penalties, only apply if certain conditions occur.

Final Thoughts

When considering a business loan, it’s crucial to look beyond just the interest rate. Additional fees and costs can significantly impact the true cost of borrowing. Using our Business Loan Calculator can help you get a full picture of your potential expenses, including both interest and fees, so you can make smarter financial decisions for your business.