Making Key Financial Calculations

Before you apply for a business loan, you can use a business calculator to estimate the size of the loan you’d qualify for. Our business calculator can also estimate your likely interest rate, as well as the probable terms of your payment plan.

Here are some of the factors that lenders will likely take into account when considering your loan:

The Age and Success of Your Business: Lenders will want to determine whether your business is well-established and successful; that’s so they can decide whether you’re likely to repay your loan. They will look at how long your business has been operating. They’ll also want to know your business’s gross revenue. Lenders want to make sure that your business is turning a profit and is capable of taking on additional debt.
Your Business’ Credit Score: Lenders will look at your business’ credit rating, as well as your personal credit score. If you are operating with business partners, lenders will also want to see their credit rating.Your credit scores will help determine whether you qualify for a loan. If you do qualify for a loan, your credit scores will also help determine the terms of the loan. How much money you qualify for, and even the interest rate you receive, may be determined by the interest rates.

Other Factors Impacting Your Loan Payments

Lenders look at a number of factors when they determine the terms of your loan. These factors can impact the payments you make every month. It’s a good idea to calculate your monthly payment ahead of time, in order to be prepared.

The Size of Your Loan
Business loans can come in all different amounts. They can be as low as $13,000 or as high as $1 million or more. If you apply for a loan through the Small Business Administration, you may qualify for up to $5 million in loans. Loans specifically designed for equipment could be from $500,000 to $1 million.

In general, the larger your loan is, the larger your monthly payments will be.

Your Interest rate
Loans come with various kinds of interest rates. Some of the more frequent kinds of interest used on business loans are:

Annual percentage rate (APR): This is a compounding annual interest rate. It typically includes some built-in fees like closing costs and loan origination fees.
Annual interest rate (AIR): Like the APR, AIR is compounding annual interest. However, it does not include any loan fees.
Factor rate: This is a figure that indicates the overall cost of financing, once it’s multiplied by the original loan amount.

Take the time to understand your interest rate before you take out a business loan. It’s important to know whether your interest rate is variable or fixed. You can also use an amortization calculator to figure out how long it would take to pay off your loan, taking into account your interest rate and your monthly payment plan.

Applicable Business Loan Fee
Most business loans come with fees. If you have an APR interest rate, your fees are already wrapped up in your rate. But if you have a different kind of credit, you may still pay fees at the start or end of your loan term.

Here are some of the more common fees:

Origination fee: This is typically charged at the outset of the loan. It covers the costs of originating, or processing and approving, your loan application.
Service or processing fees: These cover all the services your lender provides, like managing your account and issuing bills.
Prepayment penalty: In some cases, you’ll face a prepayment penalty if you pay off your loan ahead of schedule.
Late payment fee: Making your payment later than the deadline could result in a late payment fee.

Lenders can impose penalties in addition to these fees. It’s a good idea to check whether your fees could change your monthly payment plans.

Loan term
Your “term” is the amount of time you have to pay off the full balance of your loan. Your term could be as short as a few months, or it could be as long as a few years.

SBA loans often have long terms, sometimes as long as 10 to 25 years. Traditional bank loans may be as long as 10 years.

Online lenders often offer shorter terms, sometimes as short as three months. Online lenders also usually offer higher interest rates, which can mean that you’ll pay more every month.

Where can you get a business loan?

After you’ve decided how much you want to borrow and what kind of payment plan you’d like, you’ll need to start looking for a lender. Take the time to shop around for a lender that meets your unique set of needs. Here are some of your options for finding a business loan.

Online loans
Online lenders usually offer a fast application process. They may have looser requirements for credit scores, too.

However, online loans often come with relatively high interest rates. Online lenders may also not offer large loan amounts, at least compared to the amounts you can borrow from traditional banks.

SBA loans
The Small Business Administration partners with banks and other financial institutions to issue loans. The SBA guarantees the loans, which reduces the risk for banks and encourages them to lend to smaller businesses that might otherwise not qualify for a loan. The SBA also imposes a cap on interest rates.

Bank loans
Traditional bank loans can be a good choice for well-established businesses. If you have a solid relationship with the bank and are a long-time customer, you may be able to get good terms. Banks may also offer larger loans than online lenders do.

Bear in mind that banks can be slow to approve loans. It could take weeks, or even months before the bank approves your application.

Whatever your circumstances, it’s a good idea to shop around and take your time deciding which loan is right for you. Make sure you find a loan with rates you can afford, a payment plan that makes sense for you, and a balance that covers your needs.

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