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About This Calculator
Estimate monthly payments and total borrowing costs for a small business loan, SBA loan, or commercial line of credit. Business financing terms vary widely depending on the lender, your creditworthiness, and the type of collateral offered. This calculator helps entrepreneurs evaluate whether the expected return on a business investment justifies the cost of borrowed capital.
Quick Tips
- 1 SBA 7(a) loans offer rates 2-3% lower than most conventional business loans.
- 2 Prepare 2 years of tax returns and a business plan before applying for best results.
- 3 Compare term loans vs. lines of credit — use LOC for cash flow, term for assets.
Example Calculation
A small business borrows $150,000 at 8.5% for 7 years for equipment.
Monthly payment: $2,372 | Total interest: $49,268 | Annual debt service: $28,464
Types of Business Loans and Their Rates
Business loans come in several forms including term loans, lines of credit, equipment financing, and invoice factoring. Traditional bank term loans typically offer rates from 5% to 13%, while online lenders may charge 7% to 30% or higher depending on your business profile. Equipment loans often carry lower rates because the equipment serves as collateral, and business lines of credit provide flexible access to funds with interest charged only on the amount drawn.
SBA Loans vs Conventional Business Loans
SBA loans are partially guaranteed by the Small Business Administration, which allows lenders to offer lower interest rates and longer repayment terms than conventional loans. SBA 7(a) loans offer up to $5 million with terms up to 25 years and rates tied to the prime rate plus a spread. The tradeoff is a longer application process that can take 30 to 90 days, compared to just days or weeks for conventional business financing.
How Lenders Evaluate Business Loan Applications
Lenders assess business loan applications based on the five Cs of credit: character, capacity, capital, collateral, and conditions. Your personal and business credit scores, annual revenue, time in business, and cash flow statements are all critical factors. Most traditional lenders require at least two years of business history and annual revenue above $100,000, while online lenders may approve businesses with as little as six months of operating history.
Calculating the True Cost of Business Financing
The true cost of a business loan extends beyond the stated interest rate. Origination fees, closing costs, and prepayment penalties can add significantly to the total expense. Use the Annual Percentage Rate rather than just the interest rate to compare loan offers, as APR includes most fees in a single figure. Factor in opportunity cost as well, since the revenue generated by the borrowed capital should exceed the total financing cost to make the loan worthwhile.
Frequently Asked Questions
Business loan rates vary widely: SBA loans range from 5%–10%, traditional bank loans from 6%–13%, and online lenders from 7%–30%+. Your rate depends on business revenue, credit score, time in business, and the loan type.
SBA loans are partially guaranteed by the government, resulting in lower rates and longer terms. However, they require more documentation and take longer to fund (30–90 days vs 1–7 days for online lenders). SBA 7(a) loans go up to $5 million.
Most lenders require at least 2 years in business, $100,000+ in annual revenue, a personal credit score above 650, and a business plan or financial statements. SBA loans have additional requirements including collateral for larger amounts.
Yes, interest on business loans is generally tax deductible as a business expense, reducing your effective borrowing cost. If you are in the 24% tax bracket, a 9% loan effectively costs about 6.84% after the tax deduction.