Small Business Loan Calculator
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Small Business Loan Calculator
Estimated Monthly Payment
$0.00
Total Interest: $0.00
Total Repayment: $0.00
Understanding Your Small Business Loan Payments
Securing financing is a critical step for many small businesses looking to grow, invest in new equipment, manage cash flow, or expand their operations. A small business loan calculator is an invaluable tool to help you understand the financial commitment involved. This calculator helps estimate your regular payment amount, the total interest you'll pay over the loan's life, and the overall cost of borrowing.
How the Calculation Works (The Math Behind It)
The calculator uses the standardAmortizing Loan Formula to determine your fixed periodic payment (M). The formula is as follows:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
- M = Your periodic loan payment (what you'll pay each period).
- P = The principal loan amount (the total amount borrowed).
- i = Your *periodic* interest rate. This is calculated by dividing the annual interest rate by the number of payment periods in a year (e.g., annual rate / 12 for monthly payments).
- n = The total number of payments over the loan's lifetime. This is calculated by multiplying the loan term in years by the number of payment periods in a year (e.g., loan term in years * 12 for monthly payments).
Key Inputs Explained:
- Loan Amount ($): This is the total sum of money you are borrowing from the lender. Be realistic and ensure it aligns with your business needs and repayment capacity.
- Annual Interest Rate (%): This is the yearly cost of borrowing money, expressed as a percentage of the principal. Lenders assess your business's creditworthiness, financial health, and the loan's risk to determine this rate. Lower rates mean lower borrowing costs.
- Loan Term (Years): This is the duration over which you will repay the loan. A longer term typically results in lower periodic payments but a higher total interest paid. A shorter term means higher periodic payments but less interest overall.
- Payment Frequency: This determines how often you make payments (e.g., monthly, quarterly, annually). This choice impacts the calculation of the periodic interest rate (i) and the total number of payments (n).
Interpreting the Results:
- Estimated Monthly Payment: This is the amount you can expect to pay regularly. Budgeting this amount is crucial for your business's cash flow management.
- Total Interest Paid: This represents the cumulative amount of interest you will pay over the entire life of the loan. It's a significant factor in the total cost of borrowing.
- Total Repayment: This is the sum of the principal loan amount and all the interest paid over the loan term. It gives you a clear picture of the entire financial obligation.
When to Use This Calculator:
- Budgeting and Financial Planning: Estimate the impact of a loan on your monthly expenses.
- Comparing Loan Offers: Understand the true cost of different loan proposals from various lenders.
- Assessing Affordability: Determine if the required payments fit within your business's projected revenue and cash flow.
- Scenario Planning: Explore how changes in interest rates or loan terms would affect your payments.
By using this calculator, you can make more informed decisions about small business financing, ensuring you choose a loan that is both attainable and beneficial for your company's future.
function calculateLoanPayment() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var paymentFrequency = parseInt(document.getElementById("paymentFrequency").value);
var resultDiv = document.getElementById("result");
var monthlyPaymentResult = document.getElementById("monthlyPaymentResult");
var totalInterestResult = document.getElementById("totalInterestResult");
var totalRepaymentResult = document.getElementById("totalRepaymentResult");
if (isNaN(loanAmount) || isNaN(annualInterestRate) || isNaN(loanTermYears) || isNaN(paymentFrequency) ||
loanAmount <= 0 || annualInterestRate < 0 || loanTermYears <= 0 || paymentFrequency <= 0) {
alert("Please enter valid positive numbers for all fields.");
resultDiv.style.display = 'none';
return;
}
var periodicInterestRate = (annualInterestRate / 100) / paymentFrequency;
var numberOfPayments = loanTermYears * paymentFrequency;
var monthlyPayment = 0;
var totalInterest = 0;
var totalRepayment = 0;
// Handle case where interest rate is 0
if (periodicInterestRate === 0) {
monthlyPayment = loanAmount / numberOfPayments;
} else {
monthlyPayment = loanAmount * (periodicInterestRate * Math.pow(1 + periodicInterestRate, numberOfPayments)) / (Math.pow(1 + periodicInterestRate, numberOfPayments) – 1);
}
totalRepayment = monthlyPayment * numberOfPayments;
totalInterest = totalRepayment – loanAmount;
monthlyPaymentResult.textContent = "$" + monthlyPayment.toFixed(2);
totalInterestResult.textContent = "Total Interest: $" + totalInterest.toFixed(2);
totalRepaymentResult.textContent = "Total Repayment: $" + totalRepayment.toFixed(2);
resultDiv.style.display = 'block';
}