Business Loan Calculator
Typical rate: 6-30% | Term: 1-5 years
Fee amount: $2,000
Business Loan Tips
- ✓SBA loans offer the best rates but take longer to process
- ✓Consider total cost including fees, not just interest rate
- ✓Prepare financial statements and tax returns
- ✓Your personal credit score matters for small business loans
Related Calculators
Understanding Business Loans
Types of Business Loans
Term Loans
Traditional loan with fixed repayment schedule. Best for one-time expenses like equipment or expansion.
Typical: $5K-$5M | 1-5 years | 6-30% APR
SBA Loans
Government-backed loans with favorable terms. Longer approval process but best rates available.
Typical: $50K-$5M | 10-25 years | 5.5-11% APR
Equipment Financing
Loan secured by the equipment being purchased. Equipment serves as collateral.
Typical: Equipment cost | 3-10 years | 4-20% APR
Line of Credit
Revolving credit you can draw from as needed. Best for managing cash flow.
Typical: $10K-$1M | Revolving | 7-25% APR
What Lenders Look For
Business loan approval typically depends on these factors:
| Factor | What Lenders Want |
|---|---|
| Credit Score | 680+ for best rates; some accept 500+ |
| Time in Business | 2+ years preferred; some accept 6 months |
| Annual Revenue | Minimum $50K-$250K depending on loan type |
| Debt Service Coverage | 1.25x or higher (income vs. debt payments) |
| Collateral | Business assets, equipment, or real estate |
Understanding the True Cost
The interest rate alone doesn't tell the whole story. Consider all costs:
- Origination fees: 1-5% of loan amount, paid upfront
- Closing costs: Legal, appraisal, and processing fees
- Prepayment penalties: Some loans charge for early payoff
- Annual fees: Common with lines of credit
- Late payment fees: Check the terms carefully
APR vs. Interest Rate
The APR (Annual Percentage Rate) includes fees and gives a more accurate picture of borrowing costs. Always compare APRs, not just interest rates, when shopping for business loans.
SBA Loan Programs
| Program | Max Amount | Best For |
|---|---|---|
| SBA 7(a) | $5 million | Working capital, expansion, equipment |
| SBA 504 | $5.5 million | Real estate and major equipment |
| SBA Microloans | $50,000 | Startups and small needs |
Before You Apply
- Prepare 2-3 years of business and personal tax returns
- Gather recent financial statements (P&L, balance sheet)
- Create a clear business plan explaining use of funds
- Check your personal and business credit reports
- Compare offers from multiple lenders
Frequently Asked Questions
What credit score do I need for a business loan?
Credit requirements vary by lender and loan type. SBA loans typically require 680+ personal credit scores. Traditional bank loans prefer 700+. Online lenders may approve scores as low as 500-600, but at higher interest rates. Your business credit score, time in business, and revenue also significantly impact approval and rates.
What is an SBA loan and why is it popular?
SBA loans are partially guaranteed by the Small Business Administration, reducing lender risk and enabling better terms for borrowers. They offer lower interest rates (currently 5.5-11%), longer repayment terms (up to 25 years), and higher loan amounts (up to $5 million). The tradeoff is a longer, more complex application process requiring extensive documentation.
How do I calculate debt service coverage ratio (DSCR)?
DSCR = Net Operating Income / Total Debt Service. For example, if your business generates $150,000 in annual operating income and has $100,000 in annual debt payments, your DSCR is 1.5x. Most lenders want to see at least 1.25x, meaning you earn 25% more than needed to cover debt payments. Higher is better.
Should I choose a term loan or line of credit?
Term loans are best for one-time expenses like equipment purchases, expansion, or real estate - you receive a lump sum and repay over a set period. Lines of credit are better for ongoing working capital needs and managing cash flow fluctuations - you only pay interest on what you draw. Many businesses use both for different purposes.