Funding · 1 minute
Business loan payment calculator: What will the loan really cost?
Enter the amount, rate and term to see the monthly payment, the total interest over the life of the loan, and how the balance comes down year by year. Then check whether your cash flow can carry it.
| Year | Principal paid | Interest paid | Balance at year end |
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Before you borrow
The payment is only half the question
A lender will not ask whether you like the payment. It will ask whether the business can carry it: how much cash flow is left after operating costs, and how that compares with every loan payment you owe. That is the debt service coverage ratio, and it decides more applications than the rate does.
If you are choosing between kinds of capital, our guide to debt versus equity helps, and what lenders actually look for covers the file behind the application. When the numbers need to hold up in front of a lender, a lender-ready business plan and model is the next step. In North Texas, see our business plan writers in Dallas.
FAQ
Loan payment questions
How is a business loan payment calculated?
For a standard amortizing loan, the monthly payment is set so that equal payments repay the principal and all interest by the end of the term. It depends on three inputs: the amount borrowed, the annual interest rate and the length of the loan. Early payments are mostly interest; later payments are mostly principal.
Does a longer term lower the payment?
Yes, a longer term spreads principal over more payments, so each payment is smaller, but you pay interest for longer and the total cost rises. A shorter term costs less overall but needs more cash flow each month, which matters when a lender checks your debt service coverage ratio.
What does this calculator leave out?
Origination and closing fees, guarantee fees on SBA loans, prepayment penalties, variable rates, balloon payments and interest-only periods. Ask the lender for the full cost of the loan and its annual percentage rate before you compare offers.
How do I know if my business can afford the payment?
Compare the yearly payment with the cash flow the business actually generates. Lenders do this with the debt service coverage ratio, and most want roughly 1.20x to 1.35x or more. Use the button under the results to carry this loan into the DSCR calculator.