Business Loan Calculator

November 6, 2020 | Editorial Team

How to Use a Small Business Loan Calculator

Using a small business loan calculator is one of the best ways to budget your finances. You can input your business loan information: loan amount, the loan term, and the interest rate. The business loan calculator will then show you the monthly payments you’ll need to make in order to pay off the total loan amount. The loans calculator will also show you the total interest your loan will end up costing you by the end of your term.

Using these types of tools is a great way to create a financial plan and budget for your business’ cash flow.

What Affects the Business Loan Interest Rate?

Like with any loan, small business loans have interest rates. Here are some of the factors that affect the interest rate of your small business loan.

  • Personal and business credit scores: the lower the credit score, the higher the interest rate will be.
  • Your business’ assets: any valuable equipment or inventory in your business. The more assets your business has, the higher interest rates will likely be.
  • Annual turnover: the amount of money you will have leftover after paying your business’ debt.
  • The loan type: If you wanted a short-term business loan, for example, the interest would be higher compared to a long-term one.
  • Current and projected finances: if you can show lenders that your business currently makes a lot and it is expected to keep making a lot, your interest rate will likely be lower.
  • Loan security: unsecured loans with no collateral put down versus secured loans with collateral. Unsecured loans are less of a risk to your business but will come with a higher interest rate.
  • Time in business: lenders are hesitant to lend to new businesses as there is not a lot of information about their potential earnings. Thus, the less time you’ve been in business, the higher your interest will be.

Business Loan Fees Explained

Along with the interest rate and monthly payment, you’ll need to pay certain fees for your business loan.

  • Origination fee: a one-time fee paid to process your loan. Typically 2% to 7% of your loan amount.
  • Referral fee: you may have to pay a referral fee if you use a third-party to obtain a loan.
  • Insufficient funds fee: if the lender attempts to take your monthly payment and you don’t have enough in your account, you will be charged this fee. It is usually around $50.
  • Late fee: If your monthly payment is late, you will have to pay around 3% to 5% of your loan amount. Most lenders have a grace period of a few days before they consider your payment late.
  • CSBFP registration fee: All loans in Canada are subject to a 2% fee from the Canada Small Business Financing Program. It will usually just be taken from your loan amount before you receive the funds.

The Bottom Line

Knowing how much you should budget before taking out a small business loan doesn’t have to be tough, just use one of our loan calculators! It is one of the best tools for creating a budget and financial plan. All you need to do is input your loan information, such as the amount, interest rates, and loan length. You will then be able to see what your monthly payments will be as well as how much you will end up paying in interest.

With this information, you can budget appropriately or decide if you can afford to take out the loan.

Online loan search engines such as LoanConnect or RATESDOTCOM are great places to start looking for a business loan. Head over there now and look for the ‘contact us’ section on their site for more information.