1. What is a Business Loan Amortization Schedule?

An amortization schedule is a complete table of periodic loan payments, showing the amount of principal and interest that comprises each payment until the loan is paid off at the end of its term. For business loans, this helps in financial planning and tax preparation.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( Balance_t \) — Remaining balance at time t (USD)
• \( Balance_{t-1} \) — Previous balance (USD)
• \( r \) — Monthly interest rate (decimal)
• \( PMT \) — Monthly payment amount (USD)

Explanation: Each month's payment is divided between interest (based on current balance) and principal reduction, with the balance decreasing over time.

3. Importance of Amortization Schedule

Details: Understanding your amortization schedule helps businesses plan cash flow, understand interest costs, and make informed decisions about prepayments or refinancing.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator will generate a detailed month-by-month breakdown of your payments.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between principal and interest?
A: Principal is the amount borrowed, while interest is the cost of borrowing. Early payments are mostly interest, shifting to mostly principal later.

Q2: Can I make extra payments to pay off faster?
A: Yes, extra payments reduce principal directly, saving interest and potentially shortening the loan term.

Q3: Why does my payment stay the same?
A: This is a fixed-rate loan with equal monthly payments (amortizing loan). The composition changes, not the total amount.

Q4: How does interest rate affect total cost?
A: Higher rates increase total interest paid significantly over the loan term, sometimes doubling the total cost.

Q5: What's the benefit of shorter loan terms?
A: Shorter terms have higher monthly payments but much lower total interest costs and faster equity building.