A business loan can help launch your startup, expand your enterprise or allow you to stay afloat during the slow season. Depending on your needs, you could apply for funds in a lump sum or as a line of credit.
But no matter how funds get disbursed, make sure you can comfortably repay the debt. Our business loan calculator will crunch the numbers for you, showing how much each potential loan would cost you monthly and overall.
How to use our business loan calculator
You can get the information you need from our business loan calculator in just four simple steps:
- Enter your loan amount.
- Type in your loan term (in months or years).
- Add in your interest rate.
- Click “calculate.”
Then, you’ll see your monthly payment, the amount of interest you’ll pay and the total loan cost. If you want more information, you can expand the sections below the calculator to review a loan breakdown chart and amortization schedule.
Results from our business loan calculator can help you decide which loan offer might be best for your needs. For example, it will show you how much you can borrow without exceeding your monthly debt repayment budget.
Our calculator also highlights the ideal loan term for your financial situation and goals. As you enter different numbers, you’ll see that longer repayment terms have smaller monthly payments, but a higher overall cost to borrow. Conversely, you’ll notice a smaller interest charge over a shorter repayment term, but a higher monthly bill.
How to get a business loan
The business loan application process varies by lender and loan type. However, you’ll likely encounter these steps:
- Establish business credit. Lenders may want to see a positive business credit history — as opposed to your personal credit — before issuing a loan. You can start building business credit by using a business credit card that reports your activity to the commercial credit bureaus. You can also report trade credit from vendors to Dun & Bradstreet.
- Check your personal credit. Business loan lenders may require a personal guarantee from you — especially if you’re borrowing to fund a startup. A personal guarantee means you’ll have to repay the debt if your company can’t, so lenders want to know you’re creditworthy.
- Decide how much money you need. Estimate your project cost and add a small cushion to cover unexpected expenses. While you don’t want to overborrow, you don’t want to come up short either.
- Gather relevant documentation. Your lender may require various information and supporting documentation, such as LLC or Corporation paperwork, a business plan, financial projections, your Employer Identification Number (EIN) from the Internal Revenue Service (IRS) or your D-U-N-S number from Dun & Bradstreet.
- Pre-qualify with multiple lenders. Pre-qualification typically doesn’t affect your credit score since it only uses a soft credit check. You should try to pre-qualify with a few lenders at least.
- Compare all your options. Review your loan offers side-by-side to see which one best meets your needs. The business loan calculator is an excellent resource for this step as you can fill in the info for each possible loan and compare offers to find the right one for you.
- Apply for the loan. Once you’ve decided on a loan, submit a formal application with the lender. Be sure to provide any supporting information required, as well (like the documents suggested above).
- Sign the agreement and receive your funds. If approved, you’ll sign the loan agreement and wait for the funds to hit your bank account.
- Enter repayment. Add your loan payment to your monthly budget and set reminders to pay your loan each month. It’s an even better idea to set up automatic payments to ensure you pay your loan on time.
Savings tip: Consider applying for a business loan through the same financial institution where you do your business banking. A current relationship with a lender could work in your favor as many banks or credit unions offer relationship discounts.
Different types of business loans
There are several types of business loans on the market. Here are the options you’ll typically encounter:
- Term loan: Typically, when someone is looking for a business loan, they’re referring to a term loan. These types of loans are issued as a lump sum you must repay over a defined period — usually three years or more. Your monthly payment will be predictable, making it easier to fit into your budget. A term loan usually works best to finance fixed assets, like machinery, equipment or real estate.
- Line of credit: A line of credit functions just like a credit card. You can borrow up to a set limit and only need to repay the portion of the credit line you use. A business line of credit can serve as working capital, covering short-term or day-to-day expenses like supplies, marketing and inventory.
- Small Business Administration (SBA) loan: The SBA is a federal government agency that backs several types of loans. The most well-known SBA loan is the 7(a) program. You can borrow up to $5 million with a 7(a) loan, which can be used for most business purposes.
- Merchant Cash Advance (MCA): “[An MCA] allows businesses to borrow against their future credit card sales,” says Leslie Tayne, founder and principal debt attorney at Tayne Law Group, P.C. “The lender provides a lump sum of cash in exchange for a percentage of future sales. However, [we] strongly advise against this type of financing due to the predatory practices of MCA providers and exorbitant fees.”
Most business loans are secured loans. These loans require collateral, or business assets, that the lender can take possession of if the company fails to repay the debt.
Business loan eligibility
Business loan eligibility differs from lender to lender, but typically you must meet a few requirements before you can qualify.
“The lender may require a minimum business or personal credit score,” says Tayne. “Some online lenders will allow a personal score as low as 500, while other lenders may need it to be in the mid-600s. You’ll also need to show a minimum number of years in business and monthly or annual revenue. Some lenders might also require a business plan or proposal that shows how you plan to use the money and how you’ll pay back the loan.”
