Estimate your potential monthly loan payments based on key business financial metrics.
Estimated Monthly Loan Payment
$0.00
Understanding Business Loan Affordability
Securing financing is a critical step for business growth, expansion, or managing cash flow. This Business Loan Affordability Calculator helps you estimate how much you might be able to borrow and what your monthly payments could look like. It's a vital tool for financial planning and understanding your business's capacity to take on new debt.
How the Calculator Works
This calculator uses the standard loan amortization formula to determine your estimated monthly payment. The key inputs are:
Annual Revenue: Your business's total income over a year. Lenders will scrutinize this to gauge your ability to generate sales.
Annual Operating Expenses: All costs associated with running your business, excluding loan repayments. This helps determine your net operating income.
Desired Loan Amount: The principal amount you wish to borrow.
Loan Term (Months): The total duration over which you plan to repay the loan. Longer terms generally mean lower monthly payments but higher total interest paid.
Estimated Annual Interest Rate (%): The annual interest rate you expect to pay on the loan. This is influenced by your creditworthiness, the loan type, and market conditions.
The Math Behind the Calculation
The calculator estimates your business's capacity by looking at the difference between your annual revenue and annual expenses. While this calculator primarily focuses on the monthly payment of the *desired* loan amount using the standard loan amortization formula, a lender will perform a more complex analysis of your business's financial health.
The monthly payment (M) is calculated using the following formula:
n = Total Number of Payments (Loan Term in Months)
Interpreting the Results
The calculator will provide your estimated monthly loan payment and a general status indicating whether the business's revenue and expense profile suggests a reasonable capacity for such a payment. Lenders will assess your Debt Service Coverage Ratio (DSCR), which is a crucial metric for them. A common benchmark for DSCR is 1.25x or higher, meaning your net operating income is 1.25 times the required debt payments. While this calculator doesn't compute DSCR directly, it gives you a preliminary idea.
Disclaimer
This calculator is for estimation purposes only and does not guarantee loan approval or an exact monthly payment. Actual loan terms and interest rates will vary based on the lender's assessment of your business's creditworthiness, financial history, business plan, and market conditions. It is essential to consult with financial professionals and lenders for accurate information and advice tailored to your specific business needs.
function calculateLoanAffordability() {
var annualRevenue = parseFloat(document.getElementById("annualRevenue").value);
var annualExpenses = parseFloat(document.getElementById("annualExpenses").value);
var desiredLoanAmount = parseFloat(document.getElementById("desiredLoanAmount").value);
var loanTermMonths = parseInt(document.getElementById("loanTermMonths").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var monthlyPaymentElement = document.getElementById("monthlyPayment");
var affordabilityStatusElement = document.getElementById("affordabilityStatus");
var resultDiv = document.getElementById("result");
// Clear previous results
monthlyPaymentElement.innerText = "$0.00";
affordabilityStatusElement.innerText = "";
resultDiv.style.display = "none";
// Input validation
if (isNaN(annualRevenue) || isNaN(annualExpenses) || isNaN(desiredLoanAmount) || isNaN(loanTermMonths) || isNaN(annualInterestRate)) {
alert("Please enter valid numbers for all fields.");
return;
}
if (desiredLoanAmount <= 0 || loanTermMonths <= 0 || annualInterestRate < 0) {
alert("Loan amount, term, and interest rate must be positive values.");
return;
}
if (annualRevenue 0) {
monthlyPayment = desiredLoanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths)) / (Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1);
} else {
// Handle 0% interest rate
monthlyPayment = desiredLoanAmount / loanTermMonths;
}
var netOperatingIncome = annualRevenue – annualExpenses;
var monthlyNetOperatingIncome = netOperatingIncome / 12;
var statusMessage = "";
var statusColor = "#dc3545"; // Default to red for concern
// Basic affordability check (a lender would do much more)
if (monthlyNetOperatingIncome >= monthlyPayment * 1.25) { // Aiming for a DSCR of at least 1.25
statusMessage = "Based on your inputs, your business appears to have a good capacity for this loan payment.";
statusColor = "#28a745"; // Green
} else if (monthlyNetOperatingIncome >= monthlyPayment) {
statusMessage = "Your business may be able to afford this payment, but it's tight. Consider a smaller loan or longer term.";
statusColor = "#ffc107"; // Yellow
} else {
statusMessage = "Warning: Your business's estimated net income may not be sufficient to comfortably cover this loan payment.";
statusColor = "#dc3545"; // Red
}
monthlyPaymentElement.innerText = "$" + monthlyPayment.toFixed(2);
affordabilityStatusElement.innerText = statusMessage;
affordabilityStatusElement.style.color = statusColor;
resultDiv.style.display = "block";
}