Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A term loan turns a lump sum into a fixed payment, and the payment has to be covered by the cash the business actually generates. Borrowing $150,000 at 9 percent over seven years costs about $2,413 a month and about $52,722 in interest, roughly 35 percent of the loan. Lenders look at whether operating income covers the payment with room to spare, so the number to test is your cash flow in a slow month, not an average one.
Before you rely on it
What to check
Divide your monthly operating cash flow by the payment. A ratio well above one leaves room for a bad quarter, and a ratio near one does not.
The common error
Where people go wrong with business loan payment calculator
Counting the loan proceeds as income when planning the payment. The payment is a fixed obligation that continues whatever the business earns.
Sensitivity evidence
How annual interest rate changes the monthly payment
| Annual interest rate | Monthly payment | Total interest |
|---|---|---|
| 5.0% | $2,120 | $28,087 |
| 7.0% | $2,264 | $40,168 |
| 9.0%worked example | $2,413 | $52,722 |
| 11.0% | $2,568 | $65,743 |
| 13.0% | $2,729 | $79,219 |
Every input, tested
Which input moves the monthly payment most
| Input | Tested from | To | Monthly payment at each end | Swing |
|---|---|---|---|---|
| Term | 5.0 years | 9.0 years | $3,114 to $2,031 | $1,082 (45%) |
| Loan amount | $135,000 | $165,000 | $2,172 to $2,655 | $483 (20%) |
| Annual interest rate | 7.0% | 11.0% | $2,264 to $2,568 | $304 (13%) |
Two variables at once
Monthly payment by annual interest rate and loan amount
| Annual interest rate \ Loan amount | $120,000 | $150,000 | $180,000 |
|---|---|---|---|
| 5.0% | $1,696 | $2,120 | $2,544 |
| 7.0% | $1,811 | $2,264 | $2,717 |
| 9.0% | $1,931 | $2,413 | $2,896 |
| 11.0% | $2,055 | $2,568 | $3,082 |
| 13.0% | $2,183 | $2,729 | $3,275 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Loan amount | $150,000 |
| Annual interest rate | 9.0% |
| Term | 7.0 years |
| Monthly payment | $2,413 |
| Total interest | $52,722 |
Complete evidence
Full amortization schedule
Show all 84 rows
| Payment | Opening balance | Principal | Interest | Ending balance |
|---|---|---|---|---|
| Payment 1 | $150,000 | $1,288 | $1,125 | $148,712 |
| Payment 2 | $148,712 | $1,298 | $1,115 | $147,414 |
| Payment 3 | $147,414 | $1,308 | $1,106 | $146,106 |
| Payment 4 | $146,106 | $1,318 | $1,096 | $144,788 |
| Payment 5 | $144,788 | $1,327 | $1,086 | $143,461 |
| Payment 6 | $143,461 | $1,337 | $1,076 | $142,123 |
| Payment 7 | $142,123 | $1,347 | $1,066 | $140,776 |
| Payment 8 | $140,776 | $1,358 | $1,056 | $139,418 |
| Payment 9 | $139,418 | $1,368 | $1,046 | $138,051 |
| Payment 10 | $138,051 | $1,378 | $1,035 | $136,673 |
| Payment 11 | $136,673 | $1,388 | $1,025 | $135,284 |
| Payment 12 | $135,284 | $1,399 | $1,015 | $133,886 |
| Payment 13 | $133,886 | $1,409 | $1,004 | $132,476 |
| Payment 14 | $132,476 | $1,420 | $994 | $131,057 |
| Payment 15 | $131,057 | $1,430 | $983 | $129,626 |
| Payment 16 | $129,626 | $1,441 | $972 | $128,185 |
| Payment 17 | $128,185 | $1,452 | $961 | $126,733 |
| Payment 18 | $126,733 | $1,463 | $950 | $125,270 |
| Payment 19 | $125,270 | $1,474 | $940 | $123,796 |
| Payment 20 | $123,796 | $1,485 | $928 | $122,312 |
| Payment 21 | $122,312 | $1,496 | $917 | $120,816 |
| Payment 22 | $120,816 | $1,507 | $906 | $119,308 |
| Payment 23 | $119,308 | $1,519 | $895 | $117,790 |
| Payment 24 | $117,790 | $1,530 | $883 | $116,260 |
| Payment 25 | $116,260 | $1,541 | $872 | $114,718 |
| Payment 26 | $114,718 | $1,553 | $860 | $113,165 |
| Payment 27 | $113,165 | $1,565 | $849 | $111,601 |
| Payment 28 | $111,601 | $1,576 | $837 | $110,024 |
| Payment 29 | $110,024 | $1,588 | $825 | $108,436 |
| Payment 30 | $108,436 | $1,600 | $813 | $106,836 |
| Payment 31 | $106,836 | $1,612 | $801 | $105,224 |
| Payment 32 | $105,224 | $1,624 | $789 | $103,600 |
| Payment 33 | $103,600 | $1,636 | $777 | $101,964 |
| Payment 34 | $101,964 | $1,649 | $765 | $100,315 |
| Payment 35 | $100,315 | $1,661 | $752 | $98,654 |
| Payment 36 | $98,654 | $1,673 | $740 | $96,980 |
| Payment 37 | $96,980 | $1,686 | $727 | $95,294 |
| Payment 38 | $95,294 | $1,699 | $715 | $93,596 |
| Payment 39 | $93,596 | $1,711 | $702 | $91,884 |
| Payment 40 | $91,884 | $1,724 | $689 | $90,160 |
| Payment 41 | $90,160 | $1,737 | $676 | $88,423 |
| Payment 42 | $88,423 | $1,750 | $663 | $86,673 |
| Payment 43 | $86,673 | $1,763 | $650 | $84,909 |
| Payment 44 | $84,909 | $1,777 | $637 | $83,133 |
| Payment 45 | $83,133 | $1,790 | $623 | $81,343 |
| Payment 46 | $81,343 | $1,803 | $610 | $79,540 |
| Payment 47 | $79,540 | $1,817 | $597 | $77,723 |
| Payment 48 | $77,723 | $1,830 | $583 | $75,893 |
| Payment 49 | $75,893 | $1,844 | $569 | $74,048 |
| Payment 50 | $74,048 | $1,858 | $555 | $72,190 |
| Payment 51 | $72,190 | $1,872 | $541 | $70,318 |
| Payment 52 | $70,318 | $1,886 | $527 | $68,432 |
| Payment 53 | $68,432 | $1,900 | $513 | $66,532 |
| Payment 54 | $66,532 | $1,914 | $499 | $64,618 |
| Payment 55 | $64,618 | $1,929 | $485 | $62,689 |
| Payment 56 | $62,689 | $1,943 | $470 | $60,746 |
| Payment 57 | $60,746 | $1,958 | $456 | $58,788 |
| Payment 58 | $58,788 | $1,972 | $441 | $56,816 |
| Payment 59 | $56,816 | $1,987 | $426 | $54,829 |
| Payment 60 | $54,829 | $2,002 | $411 | $52,826 |
| Payment 61 | $52,826 | $2,017 | $396 | $50,809 |
| Payment 62 | $50,809 | $2,032 | $381 | $48,777 |
| Payment 63 | $48,777 | $2,048 | $366 | $46,729 |
| Payment 64 | $46,729 | $2,063 | $350 | $44,667 |
| Payment 65 | $44,667 | $2,078 | $335 | $42,588 |
| Payment 66 | $42,588 | $2,094 | $319 | $40,494 |
| Payment 67 | $40,494 | $2,110 | $304 | $38,385 |
| Payment 68 | $38,385 | $2,125 | $288 | $36,259 |
| Payment 69 | $36,259 | $2,141 | $272 | $34,118 |
| Payment 70 | $34,118 | $2,157 | $256 | $31,960 |
| Payment 71 | $31,960 | $2,174 | $240 | $29,787 |
| Payment 72 | $29,787 | $2,190 | $223 | $27,597 |
| Payment 73 | $27,597 | $2,206 | $207 | $25,390 |
| Payment 74 | $25,390 | $2,223 | $190 | $23,167 |
| Payment 75 | $23,167 | $2,240 | $174 | $20,928 |
| Payment 76 | $20,928 | $2,256 | $157 | $18,671 |
| Payment 77 | $18,671 | $2,273 | $140 | $16,398 |
| Payment 78 | $16,398 | $2,290 | $123 | $14,108 |
| Payment 79 | $14,108 | $2,308 | $106 | $11,800 |
| Payment 80 | $11,800 | $2,325 | $88 | $9,475 |
| Payment 81 | $9,475 | $2,342 | $71 | $7,133 |
| Payment 82 | $7,133 | $2,360 | $53 | $4,773 |
| Payment 83 | $4,773 | $2,378 | $36 | $2,395 |
| Payment 84 | $2,395 | $2,395 | $18 | $0.00 |
Where the inputs come from
Loan amount is what you borrow, rate is the annual interest rate from the term sheet, and term is the years to repay. Include fees such as SBA guarantee fees or origination charges when you compare offers, since some are financed. Rates depend on the lender, collateral and your credit, and SBA 7(a) loans are usually priced as a spread over the prime rate. Ask for the fully amortizing payment, not an interest-only quote.
When the result stops applying
Business loans often carry personal guarantees, collateral requirements, covenants and prepayment penalties that a payment calculation does not show. Variable rates can change the payment. Some lenders quote factor rates or fees rather than annual rates, so convert them to an APR to compare fairly, especially for merchant cash advances.
What to compare it with
Test coverage with the business DSCR calculator, and compare offers with the loan comparison and APR pages. The equipment lease versus buy calculator applies when the loan buys equipment. The working capital requirement page helps size a line of credit versus a term loan.
People also ask
Frequently asked questions
What is a typical business loan term?
Working capital loans run from months to a few years, equipment loans match the equipment life, and SBA 7(a) loans can run ten years or, for real estate, up to 25.
Do business loans require a personal guarantee?
Most small-business loans do, meaning you are personally liable if the business cannot repay. Ask what collateral and guarantees the lender requires.
Are merchant cash advances loans?
They are purchases of future sales with a factor rate, not loans, and their effective annual cost is often far higher than loan rates, so calculate the APR before accepting.