Business Loan Calculator

Loan Details

Loan Amount *

Annual Interest Rate (APR) *

%

Loan Term *

Years Months

Payment Frequency Monthly Quarterly Semi-Annually Annually

Loan Start Date

Loan Summary

Periodic Payment

Total Interest

Total Payments

Payoff Date

Loan Visualization

Amortization Schedule

Detailed loan amortization schedule showing payment breakdown over time.

#	Date	Beginning Balance	Payment	Interest	Principal	Ending Balance

What is a Business Loan and How to Use This Calculator

A business loan provides capital to a company for various purposes, such as funding operations, expansion, or equipment purchases. This calculator helps you understand the financial implications of taking on such debt. To use it, simply enter the **Loan Amount** you wish to borrow, the **Annual Interest Rate (APR)** offered by the lender, and the **Loan Term** in either years or months. The tool will instantly compute your periodic payment (EMI), total interest cost, and a complete payment schedule.

How EMI and Amortization Work

An **Equated Monthly Installment (EMI)** is the fixed amount you pay each period. It consists of two parts: interest on the outstanding balance and repayment of the principal amount. In the early stages of the loan, a larger portion of your EMI goes towards interest. As the principal reduces, the interest portion decreases, and more of your payment goes towards clearing the principal. This process is called amortization.

The formula for the periodic payment is:

Payment = P * [r(1+r)^n] / [(1+r)^n - 1]

Where: P is the principal loan amount, r is the periodic interest rate (annual rate divided by payments per year), and n is the total number of payments.

Fees, Prepayments and Their Effect on Loan Cost

Business loans often come with additional costs like processing fees or origination fees. These fees increase the total cost of your loan. Making **prepayments**, or extra payments towards your principal, can significantly reduce your total interest cost and help you pay off the loan faster. However, be aware that some lenders may charge a prepayment penalty.

When to Refinance or Prepay a Loan

Consider **prepaying** your loan if you have surplus cash and your lender does not charge a high penalty; the interest savings can be substantial. **Refinancing** involves taking out a new loan, typically at a lower interest rate, to pay off the existing one. This is a good option if market interest rates have dropped significantly since you took your loan or if your business's credit profile has improved, making you eligible for better terms.

Examples & Case Studies

1. Equipment Loan: A small bakery needs a $50,000 loan for a new oven. They secure a loan at 8% APR for 5 years. Their monthly payment would be approximately $1,014. The total interest paid over 5 years would be around $10,820.

2. Working Capital: A retail store takes a short-term loan of $20,000 for 1 year at 12% APR to manage inventory. Their monthly payment is about $1,777, with a total interest cost of roughly $1,324 for the year.

3. Expansion Loan: A tech startup borrows $250,000 for expansion at 6% APR over a 10-year term. Their monthly payment would be approximately $2,776, resulting in a total interest payment of about $83,068 over the loan's lifetime.

Frequently Asked Questions

What is an Equated Monthly Installment (EMI)?

An EMI is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are used to pay off both interest and principal each month so that over a specified number of years, the loan is paid off in full.

How do processing fees and other charges affect the total loan cost?

Fees increase the total cost of the loan. If they are 'capitalized' (added to the principal), they increase the loan amount on which interest is calculated, raising your EMI. If paid upfront, they increase your initial cash outflow.

Can I prepay my business loan?

Yes, most lenders allow prepayment, which can reduce your total interest cost and shorten the loan term. However, some lenders may charge a prepayment penalty, which this calculator can help you factor in.

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Disclaimer: This calculator provides estimates for informational purposes only. The results are based on the inputs you provide and may not reflect the actual terms offered by a financial institution. Please consult a qualified financial advisor or your lender for precise loan information.