February 07, 2022

What Is a Business Loan Calculator and Is It Helpful?

No matter why you take out a business loan, you should ask yourself whether you can afford it. With a business loan calculator, you may do just that. In this blog post, we’ll take a closer look at what a small business loan calculator is and how it can help you.

What is a Business Loan Calculator?

With a business loan calculator, you can quickly and easily figure out how much potential loans will cost you. It’s a great way to compare the various loans available to you. Many lenders as well as financial publications offer business loan calculators on their websites. For example, some Small Business Administration (SBA) lenders offer SBA loan rate calculators to their potential borrowers. In some cases, they may be able to show you rates for different loan products, such as the SBA 504 loan vs. the 7(a) loan. They can simplify your loan search and help you make a smart decision that saves you hundreds or even thousands of dollars down the road. New call-to-action

How to Use a Small Business Loan Calculator

While every small business loan calculator is different, most of them require you to input similar data. Before you use one, it’s a good idea to gather information such as:
  • Business loan amount or how much you’re borrowing
  • Interest rate
  • Loan term or the amount of time you have to repay your loan
  • Extra monthly loan payment amount (if you think you’ll pay more than the minimum)
Once you have this information handy, plug it into your calculator and click “calculate.” If you don’t have the exact numbers, don’t worry; a small business loan calculator is designed to give you a ballpark estimate, not the exact cost of your loan. You won’t know the exact cost until you submit a loan application, get approved, and receive your final numbers. You can also use a loan calculator to get an idea of how different rates, terms, and payments may impact the total cost of your loan. This can make it easier for you to decide between a few loans because it will highlight the better deal.

What You’ll Learn From a Small Business Loan Calculator 

Depending on the business loan calculator you select, you can uncover much more than the overall cost of a potential loan. Some loan calculators are more robust than others and can provide you with other valuable information. For example, you may find out your estimated monthly payment and the percentage of the total repayment that will go to principle vs. interest. A loan calculator can show you if a monthly payment would work well with your business budget, whether it’s worth shopping around for a better interest rate, the ideal repayment term for your unique needs, and so much more. It can bring you a wealth of knowledge that would be a lot more difficult to obtain if you made all the calculations by hand with a pen and paper.

3 Factors That Will Impact Your Loan Cost 

When you shop around for the best business loan and compare options, it’s important to familiarize yourself with the factors that will affect your total loan cost. The most influential factors that small business owners should consider when calculating loan costs include:

1. Loan Amount 

Of course, the more money you borrow, the more expensive your loan will be. If you take out a $50,000 loan, instead of a $10,000 loan, for example, you’ll have to prepay $40,000 more dollars plus interest. Since loan amount is the most significant factor in the total cost of your loan, don’t overextend yourself. Only borrow the amount of business financing that you need. If you’re unsure of how much money you need, you could always go the flexible route and opt for a business line of credit. With a business credit line, you may withdraw as much or as little as you’d like up to a set credit limit. Therefore, you’ll only pay interest on the loan amount that you borrow.

2. Interest Rate

The interest rate is the amount you pay to borrow money. It can also have a major effect on the total cost of your loan. A 4% interest rate as opposed to a 14% interest rate can save you thousands of dollars. Factors that can affect the interest rate you receive may include:
  • Your credit score
  • Loan amount
  • Loan term
  • Business history
  • Revenue
The better your credit and longer you’ve been in business, the lower interest rate you’re likely to land. If you’re displeased with the interest rates you’ve been offered, you can always work to improve your credit and apply for a loan later.

3. Fees

Most financing lenders charge loan fees to borrowers. While fees vary from lender to lender, the most common ones include:
  • Origination fees
  • Processing fees
  • Late fees
  • Non Sufficient funds fees
These fees may be flat rates or a percentage of your total amount. They’re often incorporated into your monthly payments. If you find a “no-fee lender,” be careful; these lenders often make up for their lack of fees with sky-high interest rates.

Conclusion: Use a Business Loan Calculator Before Finalizing Your Offer

Since most business loan calculators are free, you have nothing to lose when you use one. It can serve as a valuable tool during your search for the ideal loan. It’s wise to use a few different calculators to gather as much information as you can. A small business loan calculator can take the guesswork out of trying to figure out the total cost of a loan and give you a clear picture on the best options at your disposal. Editor’s Note: This post was updated for accuracy and comprehensiveness in February 2022.