A business loan is the fuel behind most expansions: new equipment, a second location, hiring ten people at once, or bridging a slow season. But the number that decides whether the deal actually works for your cash flow is the monthly payment — and it is easy to underestimate once SBA guarantee fees, origination fees, and amortization are layered on top of the advertised APR.
This business loan calculator estimates your monthly payment, the total interest you will pay over the life of the loan, and the up-front SBA or origination fee — the three numbers every small-business owner should compare before signing a term sheet.
How to Use
- Enter the Loan Amount — the principal you need to borrow. For an SBA 7(a) loan this is the disbursed amount before fees are financed.
- Type the Interest Rate (APR) the lender has quoted. If you are still shopping, run the number at ±0.5% to stress-test your budget.
- Choose the Loan Term. SBA 7(a) working-capital loans usually run up to 10 years; equipment and commercial-real-estate loans can stretch longer. Shorter terms mean higher payments but far less total interest.
- Set the SBA / Origination Fee if one applies. SBA guarantee fees are often 2% on loans up to $150,000 and scale down on larger loans; many lenders also charge a 1–2% origination fee. This calculator rolls that fee into the financed balance and amortizes it, which is how most SBA loans actually close.
- Read the result card: the Amount Financed shows principal plus fees, the Monthly Payment is the check you write every month, and Total Repayment is everything you will hand the lender over the full term.
If the rate is 0% (a true no-interest equipment financing or seller note), the engine simply splits the financed principal evenly across the number of months — there is no interest component to compound.
How the Math Works
Your monthly payment comes from the standard amortization formula used by banks, credit unions, and the U.S. Small Business Administration:
M = P_financed × r(1 + r)ⁿ / ((1 + r)ⁿ − 1)
Where:
- M is the monthly payment.
- P_financed is the principal plus any financed fees.
- r is the monthly interest rate — the annual APR divided by 12.
- n is the total number of monthly payments — the term in years times 12.
Worked example on a $100,000 SBA 7(a) loan at 8% APR for 5 years with a 2% SBA fee: the fee is $2,000, so the amount financed is $102,000. The monthly rate is 0.006667 and n = 60. Plugging in gives a monthly payment of about $2,068, and over 5 years the total interest paid is roughly $22,092. Notice that the 2% fee, though small, raises the payment by about $40 a month and adds a little extra interest on top — which is why fees matter even when the rate looks low.
What Is an SBA 7(a) Loan?
The SBA 7(a) program is a government-backed term loan for U.S. small businesses. The SBA guarantees 75% of the balance to the lender, which lets banks offer longer terms and lower rates than they would on an unsecured business line. Typical terms:
- Loan sizes from $50,000 up to $5 million.
- Rates usually prime plus 1.5% to 2.75%, currently in the 7–10% range.
- Terms up to 10 years for working capital, up to 25 years for commercial real estate.
- Fees: an SBA guarantee fee (financed or paid at close) plus a lender origination fee, often 1–2%.
- Eligibility: a for-profit U.S. business, usually 2+ years operating, with a personal credit check on the owner.
Bank term loans, equipment financing, and merchant cash advances do not carry the SBA fee — but they often carry a higher APR. Plug each offer into this calculator side by side; the advertised rate alone is not an apples-to-apples comparison.
Examples
Example 1 — A standard SBA 7(a) working-capital loan. A restaurant owner borrows $100,000 at 8% APR for 5 years with a 2% SBA fee. The amount financed is $102,000, the monthly payment is about $2,068, and total interest over 5 years is roughly $22,092. Total repayment, including the $2,000 fee, is about $124,092.
Example 2 — A no-fee equipment loan. A contractor finances $250,000 of machinery at 7% APR for 4 years with no origination fee. The monthly payment is about $5,987, and total interest over the term is around $37,355. Because the term is short, the interest burden is modest even though the rate is higher than a mortgage.
Example 3 — A large commercial-real-estate style loan. A small manufacturer takes out a $2,000,000 loan at 6% for 20 years with no fee. The monthly payment is about $14,329, but total interest over 20 years is roughly $1,438,869 — more than the principal itself. Running this number before you sign a long lease or mortgage prevents you from locking into a debt service your revenue cannot cover.
FAQ
How is a business loan monthly payment calculated?
The payment uses the standard amortization formula M = P_financed × r(1+r)ⁿ / ((1+r)ⁿ − 1), where P_financed is the principal plus any financed SBA or origination fee, r is the monthly interest rate (annual APR divided by 12), and n is the number of monthly payments (years times 12). This is the same formula used by SBA-approved lenders and most U.S. banks.
What is the average interest rate on a business loan?
Rates vary widely by product and credit profile. SBA 7(a) loans currently run prime plus 1.5–2.75%, roughly 7–10%. Bank term loans are often 6–12%, online lenders 10–25%, and merchant cash advances can exceed 30% on an APR basis. Always compare APR, not just the stated rate, because fees are baked into APR.
Are SBA guarantee fees financed into the loan?
Usually yes. On SBA 7(a) loans up to $150,000 the guarantee fee is 2%; it scales down on larger loans. Many borrowers choose to finance the fee so they do not have to bring extra cash to closing, which raises the amount financed and therefore the monthly payment slightly. This calculator models that financed-fee behavior.
How much should my business loan payment be relative to revenue?
A common rule of thumb is that total debt service (this payment plus any other business loans and leases) should stay under 8–12% of your monthly gross revenue. Lenders typically require a debt-service coverage ratio (DSCR) of at least 1.2×, meaning your net operating income should cover the payment 1.2 times over.
Can I pay off a business loan early?
Many business loans allow early payoff, but some SBA and bank loans charge a prepayment penalty if you repay within the first 2–3 years. Check the note before you model prepayment savings. This calculator assumes a standard fully-amortizing schedule with no prepayment penalty.
What credit score do I need for a business loan?
SBA and bank term loans generally want a personal credit score of 680 or higher, plus two years of operating history. Online lenders may approve 600–650 scores but charge materially higher APRs. If your score is below 650, expect offers in the mid-teens or higher.
Disclaimer
This business loan calculator is provided for informational purposes only and does not constitute financial, lending, legal, or tax advice. Estimates are based on the inputs you enter and the standard amortization formula; actual offers vary by lender, credit profile, industry, time in business, and SBA program rules. SBA fee percentages shown are simplified and do not reflect the full SBA fee schedule. Always confirm your final payment, fees, and terms directly with an approved SBA lender or licensed business-lending professional before committing to a loan.