Find the true APR on your term loan — monthly payment, origination fees, balloon risk, and full amortization schedule included.
This free business loan calculator goes beyond the monthly payment. Enter your loan amount, interest rate, origination fee, and term to see the true cost of capital — including the APR gap that lenders rarely mention.
Same loan, same rate — the only difference is the origination fee. This is what the lender is actually charging you for paperwork.
Annual debt service on this loan is $30.3K. To satisfy a 1.25 DSCR requirement, your business needs annual net operating income of at least $37.9K.
Direct answers to the most common questions, in plain language. Skim if you're in a hurry; dig deeper below.
APR adds origination fees into the effective rate — always higher than the stated rate.
The stated interest rate only covers what the bank charges on the outstanding balance. The true APR (annual percentage rate) folds in origination fees, SBA guarantee fees, and any other upfront costs. On a $150,000 loan with a 2% origination fee, the true APR can be 0.4–0.8 percentage points higher than the nominal rate — significant on a 5- or 7-year term.
They raise the effective cost without raising the stated rate.
An origination fee of 2% on a $150,000 loan is $3,000 you pay upfront (or net from proceeds). That reduces the cash actually available to your business — your net proceeds — while the monthly payment stays the same. The lender effectively lent you less but collects the same stream of payments, which is why the true APR is always above the quoted rate.
Term loans for capex and known costs; lines of credit for working capital.
A term loan gives you a fixed payment schedule and a known payoff date — ideal for equipment, real estate, or a one-time expansion. A revolving line of credit costs less on idle days but tends to carry a higher rate and encourages floating balances. Use this calculator for term loans; for lines, focus on the daily draw cost instead.
Most banks require a DSCR of 1.25 or higher.
Debt-service coverage ratio (DSCR) measures annual net operating income divided by annual debt payments. A DSCR below 1.0 means the business cannot cover its debt from operations. Most conventional lenders require 1.25+, meaning income exceeds debt service by 25%. SBA 7(a) loans generally require 1.15+ for the guaranteed portion.
The mechanics in short answers — no jargon, no upsell.
The bank applies your annual rate ÷ 12 to whatever principal you still owe. Early payments are mostly interest; later payments are mostly principal. This is why paying off early — or avoiding fees — has an outsized effect.
If you borrow $150,000 with a 2% origination fee, you receive $147,000 but make payments on the full $150,000. The effective cost is higher because you received less but owe the same.
APR is the monthly rate at which the present value of all payments equals the net proceeds you actually received. When fees are high, APR can exceed the nominal rate by a full percentage point or more.
A balloon means you owe a lump sum at maturity — often 10–20% of the original balance. Monthly payments look lower, but if your business cannot refinance at maturity, that balloon becomes a crisis.
Designed so anyone can model their situation in under a minute, with or without a finance background.
Total interest, origination fee, SBA fees, and true APR — all on one screen before you sign anything.
Month-by-month breakdown of principal, interest, and remaining balance, so nothing is hidden in the fine print.
See what the loan would cost without origination fees — quantify exactly what the lender is charging for.
Test whether a balloon at end of term lowers your monthly outlay enough to justify the refinance risk.
Lenders quote nominal rates. This calculator solves for the APR that accounts for every dollar of fees, so you can compare apples to apples.
Reflects current origination fee norms (1–4%), SBA 7(a) guarantee structures, and typical 5–10 year term conventions.
Everything you might ask before, during, or after using this tool.
Conventional bank term loans typically charge 0.5–2% origination. Online and alternative lenders range from 1–4%. SBA 7(a) loans carry a separate guarantee fee (1–3.5% of the guaranteed portion) in addition to any bank origination fee. Always ask for both figures before comparing lenders.
True APR is the monthly interest rate at which the present value of all scheduled loan payments equals the net proceeds you actually received (loan amount minus fees). Multiply the monthly rate by 12 to get the annual figure. When origination fees are 2% and the term is 7 years, the true APR typically runs 0.4–0.8 percentage points above the nominal rate.
A balloon payment is a lump sum due at the end of the loan term, typically after a series of smaller monthly payments. Many commercial real estate loans amortize over 20–25 years but balloon in 5–7 years. The lower monthly payment looks attractive, but if your business cannot refinance or repay the balloon at maturity, you face default risk. Always model the balloon scenario before accepting one.
Debt-service coverage ratio is annual net operating income divided by annual debt payments (principal + interest). A DSCR of 1.25 means you earn $1.25 for every $1.00 of loan obligations — the cushion that protects the lender. Most banks require 1.25 minimum; SBA lenders generally accept 1.15. Calculate your DSCR before applying: net operating income ÷ (monthly payment × 12).
The SBA 7(a) program guarantees a portion (typically 75–85%) of qualifying small-business loans, reducing lender risk. In exchange, the borrower pays a one-time guarantee fee to the SBA — currently 0.5–3.5% depending on loan size and term — that is included in closing costs or financed into the loan. The guarantee does not reduce your interest rate; it makes you more attractive to lenders who might otherwise decline. Factor the guarantee fee into your true cost calculation.
Almost never — though factor rates make it hard to tell. A merchant cash advance advances you, say, $100,000 and you repay $140,000 via daily card receipts. The factor of 1.4 sounds manageable, but if you repay over 9 months, the true APR exceeds 70%. This calculator models term loans, which are almost always cheaper than MCAs for the same amount. Use APR — not factor rate or "cost of capital" — to compare the two structures.
Most SBA loans and many conventional small-business loans require a personal guarantee from owners with 20% or more equity. This means your personal assets (home, savings) are on the line if the business defaults. Before signing, understand what assets are at risk, whether the guarantee is limited or unlimited, and whether you can negotiate a "burn-off" that removes the guarantee after a period of on-time payments.
Shorter terms reduce total interest paid but increase monthly cash outflows. Longer terms lower the monthly burden but increase cumulative interest and the time your balance sheet carries the debt. The right term depends on your cash flow predictability, the asset being financed, and your DSCR. Use this calculator to test both: a 5-year vs. 7-year term on $150,000 at 10.5% saves over $18,000 in interest if you can absorb the higher monthly payment.
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The most important word in small-business lending is APR — not factor rate, not monthly cost, not "simple" interest. Here is how the four most common structures compare on true annual cost.
A conventional term loan amortizes over 3–10 years at a fixed or floating rate. With an origination fee of 1–2%, the true APR is typically 1–2 points above the stated rate. This is the cheapest option for most established businesses.
A business line of credit charges interest only on the drawn balance — effective if you need working capital seasonally and repay quickly. The rate is usually 1–3 points higher than a term loan, and unused fees add cost if the line sits idle.
SBA 7(a) loans add a one-time guarantee fee (0.5–3.5%) but allow longer terms (up to 10 years for working capital, 25 for real estate) and lower down payments. For businesses that qualify, total cost often rivals conventional loans despite the fee.
Merchant cash advances are the most expensive structure available. A factor rate of 1.25 on $100,000 repaid over 12 months is roughly 50% APR. MCA providers rarely quote APR because regulators have not mandated it for their product category — ask for it explicitly, or calculate it yourself.
Every dollar of fee paid upfront reduces your net proceeds without reducing your payment. The math: you borrow $150,000 at 10.5%, but after a 2% origination fee, you receive $147,000. Your monthly payment — $2,321 — is calculated on the full $150,000. From the lender's perspective, they advanced $147,000 and receive $2,321/month for 84 months. Solve for the implied rate: 11.2% APR, nearly a full point above the stated rate.
The longer the term, the smaller the APR premium from a fixed-fee origination charge, because the fee is spread over more payments. A 2% fee on a 3-year loan adds about 1.4 percentage points to APR; the same fee on a 7-year loan adds about 0.7. Use this to structure negotiations: on shorter terms, push harder on the fee; on longer terms, push harder on the rate.
Lenders sometimes offer a structure where the loan amortizes over 25 years but has a 5-year balloon — meaning all remaining principal is due in month 60. Your monthly payment looks like a 25-year amortization schedule, which is far lower than a 5-year fully amortizing loan. The trade-off: in month 60, you owe a large lump sum and must refinance or sell the asset to pay it off.
This structure works if your business generates strong cash flow, real estate values rise, and interest rates stay manageable. It fails if any of those three conditions flip at the wrong time. Before accepting a balloon, model the worst case: what happens if rates rise 3% by maturity and the business's DSCR slips to 1.1? If that scenario forces a sale or a distress refinance, the lower monthly payment was not worth it.
Debt-service coverage ratio is the single most important underwriting metric for commercial term loans. The formula: DSCR = annual net operating income ÷ annual debt service. A DSCR of 1.25 means for every $1.00 of loan payments, your business generates $1.25 — a 25% buffer. Banks like this cushion because it absorbs a revenue dip without default.
Net operating income in this context means revenue minus operating expenses, before interest, taxes, depreciation, and amortization (EBITDA-adjacent, but not identical). Lenders add back depreciation and subtract out capital expenditures differently; ask your lender exactly how they define it for their model.
If your current DSCR is below 1.25, focus on reducing monthly debt service (longer term, lower rate) or improving operating income before applying. Running the numbers in this calculator with different term lengths shows you which levers move the DSCR needle most.
On most SBA loans and many conventional loans to small-business owners, the lender requires a personal guarantee from anyone owning 20% or more of the business. An unlimited personal guarantee means your personal assets — home equity, savings, investments — can be seized if the business defaults. A limited guarantee caps exposure at a fixed dollar amount or percentage.
There is no universal rule about whether to sign a personal guarantee. The relevant questions: Is this asset or expansion worth the personal risk? What is the worst-case scenario if the business fails? Can I negotiate a limited guarantee or a "burn-off clause" that removes the guarantee after 24 months of clean payments?
The right answer depends on your personal balance sheet and risk tolerance, not on a formula. What this calculator can tell you is the total exposure: if you default in month 18, the lender would pursue roughly the outstanding balance at that point, which the amortization schedule shows precisely.
Two short notes worth reading before you trust any number on this page.
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We are not a bank, NBFC, advisor, broker, or distributor of any financial product. The numbers shown here are estimates for educational purposes only, based on the inputs you provide.
Results are not financial, legal, or tax advice. Please consult a qualified professional before any decision about your loan, investments, or personal finances. Actual loan terms and charges depend on your bank and individual circumstances.
