Calculate Sba Loan

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SBA Loan Affordability Calculator

Calculate how much SBA loan you might be able to afford based on your projected revenue and desired debt-to-income ratio.

1.25 (Lenders often require at least this) 1.30 1.35 1.40 1.50 1.75 2.00

Estimated Maximum SBA Loan Amount

$0.00

Understanding SBA Loan Affordability

The Small Business Administration (SBA) offers loan programs that can be crucial for business growth, working capital, or real estate acquisition. While the SBA itself doesn't lend money directly, it guarantees a portion of loans made by traditional lenders, making it easier for small businesses to qualify and secure funding.

A key factor in determining how much a lender will approve is your business's ability to repay the loan. This is often assessed using the Debt Service Coverage Ratio (DSCR).

What is Debt Service Coverage Ratio (DSCR)?

DSCR is a financial metric that measures a company's available cash flow to pay off its current debt obligations. It's calculated by dividing the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by the total debt service (principal and interest payments).

A DSCR of 1.0 means the company has just enough to cover its debt obligations. Lenders typically prefer a DSCR significantly above 1.0 (e.g., 1.25 or higher) to ensure a buffer for unexpected expenses or revenue fluctuations.

How This Calculator Works:

This calculator uses a simplified approach to estimate the maximum SBA loan amount you might qualify for, based on your projected revenue and a desired DSCR.

  • Step 1: Determine Available Debt Service Amount: We first estimate your business's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). A common proxy is to assume EBITDA is a percentage of revenue. For this calculator, we'll use a simplified approach where we assume your Net Operating Income (which is used for debt service calculation) is a portion of your projected revenue. For simplicity, we often see lenders looking at metrics like Net Income After Taxes. A common assumption is that a significant portion of revenue can be allocated to debt service, after covering operational costs. For this calculator, we're directly calculating the Maximum Annual Debt Service your revenue can support based on your desired DSCR.
  • Step 2: Calculate Maximum Annual Debt Service: We take your Projected Annual Revenue and assume a portion is available for debt service. A common approach is to work backwards. If you want a DSCR of X, then your Annual Debt Service must be less than or equal to your Available Cash Flow / X. For this calculator, we're estimating the Maximum Annual Debt Service by considering what your revenue can support given the desired DSCR. A simplified way to think about it is: Maximum Annual Debt Service = (Projected Annual Revenue * Assumed Profit Margin) / Desired DSCR. For simplicity in this tool, we directly calculate the *total annual debt payment* your business can handle based on the DSCR.
  • Step 3: Calculate Maximum Loan Amount: Once we know the maximum annual payment your business can afford, we can calculate the maximum loan principal using a standard loan amortization formula. We factor in the Interest Rate and the Loan Term (in years). The formula essentially asks: "What loan amount (principal) can be fully paid off over Loan Term years with annual payments of Maximum Annual Debt Service, at an interest rate of Interest Rate?"

Formula Breakdown:

1. Maximum Annual Debt Service (ADS) Supportable: This is derived from the DSCR. A common approach is to consider your business's Net Operating Income or EBITDA. For this calculator, we'll make a simplifying assumption about the portion of revenue available for debt service. A practical approach often involves lenders assessing your historical and projected profitability. The calculation here aims to find the maximum annual payment your revenue can support. Let's assume a business can realistically allocate Y% of its revenue to debt service after all other operating expenses are covered. Max Annual Debt Service = (Projected Annual Revenue * Y) / Desired DSCR. For this calculator's simplified logic, we estimate the total annual payment capacity based on the DSCR. Total Annual Payment Capacity = (Projected Annual Revenue / Desired DSCR) * Profit Margin Factor. The Profit Margin Factor is a simplification. Let's refine the logic to be more direct: We need to calculate the maximum loan amount (P) such that its annual payment (M) satisfies the DSCR. M = P * [i(1+i)^n] / [(1+i)^n - 1] where `i` is the monthly interest rate and `n` is the total number of payments. The lender needs EBITDA >= DSCR * (Principal Payment + Interest Payment). This calculator simplifies by finding the maximum annual payment (M) that the revenue can support. Let's use a common industry guideline: Lenders often look for the business to have 1.25x or more of its net income available to cover loan payments. A simplified way to estimate the *total annual payment capacity* your business can support is by taking a percentage of revenue (representing Net Income/EBITDA) and dividing by the DSCR. A general profit margin might be assumed. For this calculator, let's directly calculate the maximum affordable annual payment: Max Annual Payment = (Projected Annual Revenue * [A reasonable assumed profit margin %]) / Desired DSCR. Let's assume a 15% profit margin for illustrative purposes. Max Annual Payment = (Projected Annual Revenue * 0.15) / Desired DSCR

  • 2. Monthly Payment Calculation: Convert the Max Annual Payment to a monthly payment: Monthly Payment = Max Annual Payment / 12
  • 3. Loan Principal Calculation: Using the loan payment formula (amortization), we solve for the Principal (P), which represents the maximum loan amount: P = M * [1 - (1 + i)^-n] / i Where: – P = Principal loan amount (what we want to find) – M = Monthly Payment (calculated in step 2) – i = Monthly interest rate ((Annual Interest Rate / 100) / 12) – n = Total number of payments (Loan Term (Years) * 12)

    • Disclaimer: This calculator provides an estimate for educational purposes only. Actual SBA loan approval depends on many factors, including lender policies, business plan, credit history, collateral, and specific SBA program requirements. Consult with a lender or financial advisor for precise figures.

    function calculateSbaLoan() { var projectedRevenue = parseFloat(document.getElementById("projectedRevenue").value); var desiredDSCR = parseFloat(document.getElementById("desiredDSCR").value); var interestRate = parseFloat(document.getElementById("interestRate").value); var loanTerm = parseFloat(document.getElementById("loanTerm").value); var resultDiv = document.getElementById("result"); var loanAmountResultDiv = document.getElementById("loanAmountResult"); var explanationTextDiv = document.getElementById("explanationText"); // Clear previous results and error messages loanAmountResultDiv.innerText = "$0.00"; explanationTextDiv.innerText = ""; // Input validation if (isNaN(projectedRevenue) || projectedRevenue <= 0) { explanationTextDiv.innerText = "Please enter a valid projected annual revenue."; explanationTextDiv.style.color = "red"; return; } if (isNaN(desiredDSCR) || desiredDSCR <= 1) { explanationTextDiv.innerText = "Please enter a desired DSCR greater than 1."; explanationTextDiv.style.color = "red"; return; } if (isNaN(interestRate) || interestRate 20) { explanationTextDiv.innerText = "Please enter a valid interest rate between 0% and 20%."; explanationTextDiv.style.color = "red"; return; } if (isNaN(loanTerm) || loanTerm 30) { explanationTextDiv.innerText = "Please enter a valid loan term between 1 and 30 years."; explanationTextDiv.style.color = "red"; return; } // — Calculation Logic — // Assume a reasonable profit margin for calculating available debt service capacity. // This is a simplification. Lenders look at EBITDA or Net Operating Income. // A common business might have a net profit margin between 10-20%. Let's use 15% as a placeholder. var assumedProfitMargin = 0.15; // Calculate the maximum annual payment the business can afford to service based on revenue, profit margin, and DSCR. // This is the total amount available for principal and interest payments. var maxAnnualPaymentCapacity = (projectedRevenue * assumedProfitMargin) / desiredDSCR; // Convert annual interest rate to monthly interest rate var monthlyInterestRate = (interestRate / 100) / 12; // Convert loan term in years to total number of monthly payments var numberOfPayments = loanTerm * 12; // Calculate the maximum loan amount (Principal) using the loan amortization formula solved for P: // P = M * [1 – (1 + i)^-n] / i // Where M is the monthly payment, i is the monthly interest rate, and n is the number of payments. var maxLoanAmount = 0; if (monthlyInterestRate > 0) { // Standard loan payment formula P = M * [1 – (1 + i)^-n] / i // We need to calculate M from maxAnnualPaymentCapacity first var monthlyPayment = maxAnnualPaymentCapacity / 12; maxLoanAmount = monthlyPayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate; } else { // Handle case where interest rate is 0% (though unlikely for SBA loans) // In this case, the loan amount is simply the total available payment capacity over the term. maxLoanAmount = maxAnnualPaymentCapacity; } // Format the result var formattedLoanAmount = maxLoanAmount.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 2, maximumFractionDigits: 2 }); loanAmountResultDiv.innerText = formattedLoanAmount; explanationTextDiv.style.color = "#555"; // Reset color to default explanationTextDiv.innerText = "Based on your inputs, your business can potentially support an annual debt service of approximately " + maxAnnualPaymentCapacity.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 }) + " per year."; // Add a professional touch to the result presentation resultDiv.style.borderColor = "#28a745"; // Success green border resultDiv.style.backgroundColor = "#f0fff0"; // Light green background }

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