The amortising payment formula
Payment = P × r ÷ (1 − (1 + r)^−n), where r is the monthly rate and n the number of months. It is the same maths as a mortgage — business loans, equipment finance and SBA loans all amortise this way unless they are interest-only.
Why the term changes everything
A 150,000 loan at 8.5% costs about 3,078/month over 60 months and 1,849 over 120. Halving the payment roughly doubles the interest paid. Short terms protect margin; long terms protect cash flow — choose deliberately.
What lenders look at
- Debt service coverage ratio: cash flow ÷ annual repayments, 1.25× minimum
- Time in business (two years opens far better terms)
- Personal guarantee and credit score for smaller loans
- Collateral or a UCC filing on business assets
Hidden costs
Origination fees (1–3%), closing costs, and for SBA loans the guarantee fee. Add them to the principal when comparing offers, and compare APR rather than the nominal rate.
Frequently Asked Questions
What is a good business loan rate?
Bank term loans run prime plus 1–3%; SBA loans are often lower but slower; online lenders charge considerably more.
Should I choose a longer term?
Longer terms lower the payment but raise total interest — decide based on cash flow, not payment size alone.
Can I pay off early?
Check for prepayment penalties; many business loans have none, some do.
Assumptions & disclaimer
Results are estimates for planning. Fee schedules, tax brackets and deduction limits change; confirm current figures with the marketplace, the IRS or a qualified accountant before making decisions. Nothing here is financial, tax or legal advice.
Privacy & Your Data
BizCalcTool runs entirely in your browser. The figures you enter are never uploaded, stored or shared — there is no backend to send them to.