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A business loan calculator helps you understand the true cost of borrowing — not just the interest rate, but the actual monthly payment, total interest paid, and how much of each payment goes to principal vs interest.
The amortization formula
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n − 1]
Where: - P = principal (loan amount) - r = monthly interest rate (APR / 12 / 100) - n = number of monthly payments (term in months)
For a $250,000 loan at 7.5% APR over 60 months: r = 0.075/12 = 0.00625 Monthly payment = $250,000 × (0.00625 × 1.00625^60) / (1.00625^60 − 1) = $5,009/month Total paid = $300,553 Total interest = $50,553 (20.2% of principal)
SBA loan benchmarks
| Loan type | Typical rate | Max term | Use case |
|---|---|---|---|
| SBA 7(a) | Prime + 2.25–4.75% | 10 years | General working capital, equipment |
| SBA 7(a) real estate | Prime + 1.5–2.75% | 25 years | Commercial real estate |
| SBA 504 | ~6–7% fixed | 10–25 years | Real estate + equipment |
| SBA Microloan | 8–13% | 6 years | Small businesses, <$50k |
Note: SBA loans require personal guarantee and good credit (650+ FICO typical).
Debt service coverage ratio (DSCR)
Lenders evaluate your ability to repay using DSCR: DSCR = Annual Net Operating Income / Annual Debt Service
Most lenders require DSCR ≥ 1.25 — meaning for every $1 in annual debt payments, you earn $1.25 in NOI. A DSCR below 1.0 means the business can't cover debt service from operations.
To calculate DSCR: take your annual net income before debt payments and divide by total annual loan payments (this calculator's monthly payment × 12).
Interest cost comparison
Loan term affects total interest paid dramatically:
| $250k at 7.5% APR | Monthly payment | Total interest |
|---|---|---|
| 36 months | $7,758 | $29,277 |
| 60 months | $5,009 | $50,553 |
| 84 months | $3,866 | $74,762 |
| 120 months | $2,978 | $107,336 |
Longer terms lower monthly payments but significantly increase total interest. Choosing the right term depends on your cash flow needs and the cost of capital.
Frequently asked questions
What does this calculator do? Calculate monthly payment, total paid, and total interest for any business loan using the standard amortization formula. Enter loan amount, APR, and term in months.