The loan payment formula
For a fixed-rate loan with monthly payments: Payment = P × r ÷ (1 − (1 + r)−n), where P is the amount borrowed, r is the annual rate ÷ 12 and n is the number of monthly payments.
Example: $50,000 at 9.5% over 5 years (60 payments) gives a monthly payment of about $1,050. Over the term you repay roughly $63,000, so the interest cost is about $13,000. A 3% origination fee would add another $1,500.
Common small business loan types
- Term loans – a lump sum repaid in fixed monthly payments over 1–10 years. This calculator models these.
- SBA loans – US government-guaranteed loans (such as SBA 7(a)) with long terms and capped rates, but more paperwork.
- Lines of credit – borrow, repay and borrow again; interest only on what you use.
- Equipment financing – the equipment itself secures the loan.
- Invoice financing – borrow against unpaid invoices. Often expensive; fixing slow payers with clear payment terms and late fees can be cheaper.
Look at the total cost, not just the rate
Lenders quote rates differently. Some use a factor rate (for example 1.25, meaning you repay $1.25 for every $1 borrowed) which can hide a very high annual cost on a short loan. Always compare the total amount you will repay, plus every fee, over the same period. This calculator is an estimate; your lender's figures may differ slightly because of rounding and payment dates.
Frequently asked questions
How is a business loan payment calculated?
With the standard amortization formula: payment = P × r ÷ (1 − (1 + r)^−n), using the monthly rate r and the number of payments n. Each payment covers that month's interest and repays some principal.
What is an origination fee?
A one-time lender fee, usually a percentage of the loan, charged for processing it. It is often deducted from the money you receive, so you pay interest on more than you actually get.
Does a longer term save money?
A longer term lowers the monthly payment but increases the total interest you pay. Choose the shortest term whose payment your cash flow can comfortably cover.
Is this financial advice?
No. It is an estimate for planning. Compare written offers from lenders and speak to an accountant or financial adviser before borrowing.
