Small Business Loan Calculator

Loan Payment Formula:

\[ \text{Loan Payment} = \text{Amount} \times \frac{\text{Rate}}{1 - (1 + \text{Rate})^{-\text{Term}}} \]

Monthly Payment:

Total Payment:

Total Interest:

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1. What is a Small Business Loan?

A small business loan is financing designed to help entrepreneurs start, run, or grow their businesses. These loans typically have fixed monthly payments calculated based on the principal amount, interest rate, and loan term.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ \text{Monthly Payment} = \text{Amount} \times \frac{\text{Rate}}{1 - (1 + \text{Rate})^{-\text{Term}}} \]

Where:

\( \text{Amount} \) — Loan principal in USD
\( \text{Rate} \) — Monthly interest rate (annual rate ÷ 12)
\( \text{Term} \) — Loan duration in months

Explanation: The formula calculates the fixed monthly payment required to fully amortize the loan over its term.

3. Importance of Loan Calculation

Details: Accurate loan payment calculation helps business owners understand their financial commitments, compare loan offers, and plan cash flow effectively.

4. Using the Calculator

Tips: Enter loan amount in USD, monthly interest rate as a decimal (e.g., 0.01 for 1%), and term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly?
A: Divide the annual percentage rate (APR) by 12 (months) and convert from percentage to decimal (e.g., 12% APR = 0.01 monthly).

Q2: What's the difference between interest rate and APR?
A: APR includes both interest rate and any additional loan fees, providing a more complete cost picture.

Q3: Are there different types of business loans?
A: Yes, including term loans, lines of credit, SBA loans, equipment financing, and merchant cash advances.

Q4: What affects my business loan terms?
A: Factors include credit score, business revenue, time in business, industry risk, and collateral.

Q5: Should I get a fixed or variable rate loan?
A: Fixed rates provide predictable payments; variable rates may start lower but can increase over time.