Calculate monthly payments and total interest costs for your commercial financing.
Calculation Summary
Monthly Installment:$0.00
Total Interest Paid:$0.00
Upfront Fees:$0.00
Total Cost of Loan:$0.00
Understanding the Real Cost of Business Loans
When securing capital for business expansion, equipment purchases, or cash flow management, looking only at the "monthly payment" can be a mistake. To make a sound financial decision, you must understand the Total Cost of Borrowing.
How Business Interest is Calculated
Most term loans for businesses use a standard amortization formula. Unlike simple interest, where interest is only calculated on the principal, amortized loans calculate interest based on the remaining balance each month. This means in the early years of your loan, a larger portion of your payment goes toward interest rather than principal.
Realistic Example:
If a company takes a $100,000 loan at a 8% annual interest rate over 5 years:
The monthly payment would be approximately $2,027.64.
Over 60 months, the total payback is $121,658.33.
The "Cost of Money" is $21,658.33 in interest plus any origination fees.
Key Factors That Influence Your Business Loan
Principal Amount: The total amount of cash you receive upfront.
Interest Rate: The percentage charged by the lender. Small Business Administration (SBA) loans often have lower rates than private merchant cash advances.
The Term: A longer term (e.g., 10 years) reduces your monthly payment but significantly increases the total interest paid over the life of the loan.
Origination Fees: Many lenders charge between 1% and 5% of the loan amount just to process the application. This is a "hidden" cost that should be factored into your APR.
Strategic Tips for Business Borrowing
To keep your interest costs low, consider making bi-weekly payments if your lender allows it, or paying down the principal early. Always check for "pre-payment penalties" before signing a contract. If you have a high-interest loan now, using this calculator can help you determine if refinancing at a lower rate would save your business money in the long run.
function calculateLoan() {
var principal = parseFloat(document.getElementById('loanAmount').value);
var annualRate = parseFloat(document.getElementById('annualRate').value);
var years = parseFloat(document.getElementById('loanTerm').value);
var feePercent = parseFloat(document.getElementById('originationFee').value);
if (isNaN(principal) || isNaN(annualRate) || isNaN(years) || principal <= 0 || years <= 0) {
alert("Please enter valid positive numbers for amount, rate, and term.");
return;
}
// Monthly interest rate
var monthlyRate = (annualRate / 100) / 12;
// Total number of payments
var numberOfPayments = years * 12;
var monthlyPayment = 0;
// Formula for Amortization: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
if (monthlyRate === 0) {
monthlyPayment = principal / numberOfPayments;
} else {
var x = Math.pow(1 + monthlyRate, numberOfPayments);
monthlyPayment = (principal * x * monthlyRate) / (x – 1);
}
var totalRepayment = monthlyPayment * numberOfPayments;
var totalInterest = totalRepayment – principal;
var upfrontFees = principal * (feePercent / 100);
var totalCost = totalRepayment + upfrontFees;
// Formatting as Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
document.getElementById('monthlyPayment').innerText = formatter.format(monthlyPayment);
document.getElementById('totalInterest').innerText = formatter.format(totalInterest);
document.getElementById('upfrontFees').innerText = formatter.format(upfrontFees);
document.getElementById('totalCost').innerText = formatter.format(totalCost);
// Show Results
document.getElementById('results').style.display = 'block';
}