Business Loan Calculator
Estimate the payment, total cost and effective APR of a business loan, including amortizing term loans and factor-rate merchant cash advances. Enter the amount, rate or factor, term and fees, and the calculator also shows your DSCR.
Estimate Your Business Loan Payment, Cost and DSCR
Business Loan Formula
Where:
- \(P\) — payment per period
- \(L\) — loan amount (principal)
- \(r\) — interest rate per period
- \(n\) — total number of payments
- \(m\) — payments per year (12, 26, 52 or 260)
- \(R\) — total repayment of a factor-rate loan
- \(k\) — factor rate (e.g. 1.25 ×)
- \(DSCR\) — debt service coverage ratio
- \(NOI\) — annual net operating income
The first formula is the standard annuity payment for an amortizing term loan. The second gives the fixed total repayment of a factor-rate merchant cash advance, which charges no interest rate but a multiplier on the principal. The third expresses how comfortably the business's income covers its annual debt payments.
Business Loan – Calculation Example
Example: a business takes a $100,000 amortizing term loan at 9.5% APR for 5 years (60 months) with monthly payments and a 2% origination fee, with annual net operating income of $40,000.
\[ r = \frac{0.095}{12} = 0.0079167 \]
\[ P = \frac{100000 \times 0.0079167}{1 - (1 + 0.0079167)^{-60}} = 2{,}100.19 \]
\[ \text{Total repayment} = 2{,}100.19 \times 60 = 126{,}011.40 \]
\[ DSCR = \frac{40{,}000}{2{,}100.19 \times 12} = 1.59 \]
Result: the monthly payment is $2,100.19, total repayment is $126,011.40, and the total cost of funds is $26,011.40. Because the 2% fee ($2,000) reduces the net proceeds to $98,000, the effective APR works out to about 10.37%. Annual debt service is $25,202.28, giving a DSCR of 1.59 — comfortably above the 1.25 most commercial lenders require.
How to use the calculator
- Enter the Loan amount — the principal the lender advances before the origination fee is deducted.
- Pick the Loan type: "Amortizing term loan" or "Factor-rate loan (merchant advance)". The input fields switch automatically between the Interest rate (APR) and the Factor rate.
- For a term loan, enter the Interest rate (APR); for a merchant advance, enter the Factor rate (typically 1.1–1.5).
- Set the Term in years or months using the "As" selector. Factor-rate advances usually run only 3–18 months.
- Choose the Payment frequency: monthly, every 2 weeks, weekly, or daily on business days (the standard merchant-cash-advance convention of 260 days per year).
- Enter the Origination fee as a percentage of the loan amount.
- Optionally enter your Annual net operating income — business income after operating expenses but before debt payments. Enter 0 if you want to skip the DSCR.
- Read the results: payment per period, number of payments, total repayment, total cost of funds, effective APR including the fee, annual debt service, and DSCR — plus a year-by-year amortization schedule for term loans or an itemized cost breakdown for factor-rate loans.
What a business loan calculator tells you
A business loan calculator turns a lender's quoted terms into the numbers that actually matter to your cash flow: how much comes out of your account each period, how much you repay in total, and what the money really costs once fees are included. Small differences in rate, term or fees compound into large differences over the life of the loan, so running several scenarios before signing is one of the cheapest forms of due diligence available.
The calculator handles the two most common structures in business lending. An amortizing term loan charges interest on the outstanding balance, and each payment combines interest and principal so the loan reaches zero exactly at the end of the term. A factor-rate loan — the structure used by merchant cash advances — charges no interest rate at all; instead you repay a fixed total equal to the loan amount multiplied by the factor rate, spread evenly over the term. Factor rates look deceptively small (1.25 × sounds like "25%"), but the equivalent APR depends heavily on how short the term is: the same 1.25 factor over 6 months is dramatically more expensive than over 24 months, which is why short advances routinely imply 60–200% APRs.
The effective APR including the fee is the most honest cost metric shown. An origination fee reduces the cash you actually receive at closing, so the calculator solves for the rate that equates the net proceeds with the payment stream. This lets you compare a 9.5% loan with a 2% fee against a 10% loan with no fee on equal footing.
The DSCR (debt service coverage ratio) measures whether the business can afford the loan: annual net operating income divided by annual debt payments. A DSCR of 1.59 means the business earns $1.59 of income for every $1 of debt service. Most commercial lenders want at least 1.25; below 1.0 the business cannot cover its payments from operations at all. If your DSCR is thin, our debt coverage ratio calculator goes deeper into this metric.
Assumptions, limitations and practical tips
- Payments are assumed level and never missed. Real business loans may have variable rates, seasonal adjustments, prepayment penalties or balloon payments, none of which are modeled here.
- The quoted APR for amortizing loans is a nominal annual rate divided by the payment frequency; it is not compounded to an APY. To compare yields on equivalent footing, see the annual percentage yield calculator.
- Daily payments use 260 business days per year, the standard merchant-cash-advance convention. "Every 2 weeks" gives 26 payments per year — effectively 13 monthly payments — which pays the loan down faster than monthly at the same quoted rate.
- Net operating income must be before debt payments but after all operating expenses. Mixing in owner salaries or existing loan payments will skew the DSCR.
- Lenders quote the origination fee on the loan amount, not the net proceeds — a real cost difference when comparing offers. Closing costs of other kinds can be estimated with the closing costs calculator.
- Factor-rate loans almost never allow early-payoff savings: the total repayment is fixed regardless of how quickly you pay. If you expect to prepay, an amortizing term loan is usually much cheaper.
Comparing loan offers
When shopping for a business loan, compare offers on effective APR including all fees — not on the headline rate or factor rate — and on annual debt service relative to your income. A consumer personal loan calculator uses the same payment math if you are weighing a personal loan separately. Run each offer through this calculator with identical payment frequency and term so the comparison is apples-to-apples, then check the DSCR for the least favorable offer to make sure the business survives the worst terms you are considering.
Frequently Asked Questions
How do I calculate a business loan payment by hand?
Divide the APR by the number of payments per year to get the periodic rate \(r\), then apply \(P = \frac{L \cdot r}{1-(1+r)^{-n}}\), where \(n\) is the total number of payments. For example, $50,000 at 8% monthly over 3 years: \(r = 0.006667\), \(n = 36\), so \(P \approx $1,565.50\). With a 0% rate the payment is simply \(L/n\). Verify any lender's quote this way before signing.
What is a good DSCR for a business loan?
Most commercial lenders look for 1.25 or higher, meaning the business generates at least $1.25 of net operating income for every $1 of annual debt payments. Banks and SBA lenders often prefer 1.25–1.5; hard-money or cash-advance lenders may accept less, but at higher rates. Below 1.0, the business cannot cover payments from operations and relies on reserves or new borrowing, so expect a denial or a much smaller loan.
How do I convert a factor rate into an APR myself?
Divide the total repayment by the loan amount to find the total percentage cost, then annualize roughly by dividing again by the term in years. A 1.30 factor over 9 months costs 30% total, or about 30 ÷ 0.75 ≈ 40% annually — already a rough estimate. The exact figure depends on payment frequency, because each payment returns money to the lender sooner, which pushes the true APR higher. Run the numbers through the calculator rather than eyeballing it.
Why is my effective APR higher than the quoted interest rate?
Because the origination fee reduces the cash you actually receive while your payments stay based on the full loan amount. Paying $2,100 a month on money that was really $98,000 in your pocket is more expensive than the same payment on $100,000. Short terms amplify the effect: a 3% fee on a one-year loan adds roughly 3 percentage points to the APR, while on a ten-year loan it adds only about 0.5 points.
Does paying weekly or bi-weekly instead of monthly save money?
Yes, with an amortizing loan. With the quoted rate divided across more periods, 26 bi-weekly payments equal 13 monthly payments per year, so you retire principal faster and pay less total interest. The savings on daily (260) payments are smaller but real. A factor-rate loan is different: the total repayment is fixed by the factor, so paying more frequently changes only your cash-flow rhythm, not your cost.
What is the most common mistake when comparing loan offers?
Comparing headline numbers directly — for example, treating a 1.25 factor rate as "25% interest" and calling it cheaper than a 22% APR loan. The factor ignores how quickly you repay; over 6 months, 1.25 can exceed 80% APR. Always convert every offer to an effective APR including all fees, using the same term and payment frequency, and then compare annual debt service against your income.
What counts as net operating income for the DSCR?
Take the business's annual revenue and subtract all operating expenses — rent, payroll, inventory, utilities, taxes, insurance — but before deducting any loan principal or interest payments. Use a realistic trailing-twelve-month figure, not the best month annualized, and exclude one-time windfalls. Lenders will recalculate NOI from your tax returns and bank statements, so an inflated input only sets you up for a stalled underwriting process.