Small Business Administration (SBA) loans are a popular financing option for businesses, offering favorable terms and government backing. Calculating the monthly repayment is crucial for financial planning. This calculator helps you estimate your monthly principal and interest payment for an SBA loan.
How SBA Loans Work
SBA loans are not directly issued by the SBA. Instead, they are provided by banks and other lending institutions, with the SBA guaranteeing a portion of the loan. This guarantee reduces the risk for lenders, making it easier for small businesses to secure funding. Common SBA loan programs include the 7(a) loan program, the CDC/504 loan program, and microloans.
The SBA Loan Repayment Formula
The monthly payment for an SBA loan is typically calculated using the standard amortizing loan formula, which determines a fixed monthly payment that covers both principal and interest over the life of the loan. The formula is as follows:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly loan payment (principal and interest)
P = The principal loan amount (the total amount you borrow)
i = Your *monthly* interest rate. This is calculated by dividing your annual interest rate by 12 (e.g., 7.5% annual rate becomes 0.075 / 12 = 0.00625 monthly rate).
n = The total number of *monthly* payments over the loan's lifetime (loan term in years multiplied by 12).
Calculator Inputs Explained:
Loan Amount ($): The total sum of money you are borrowing from the lender.
Annual Interest Rate (%): The yearly interest rate charged by the lender, as a percentage.
Loan Term (Months): The total duration of the loan, specified in months.
Example Calculation:
Let's say you are approved for an SBA loan with the following terms:
Loan Amount (P): $250,000
Annual Interest Rate: 8.0%
Loan Term: 10 years (which is 120 months)
First, we need to calculate the monthly interest rate (i):
i = 8.0% / 12 = 0.08 / 12 = 0.00666667
Next, we calculate the total number of payments (n):
n = 10 years * 12 months/year = 120 months
Now, plug these values into the formula:
M = 250,000 [ 0.00666667(1 + 0.00666667)^120 ] / [ (1 + 0.00666667)^120 – 1]
M = 250,000 [ 0.00666667 * (1.00666667)^120 ] / [ (1.00666667)^120 – 1]
M = 250,000 [ 0.00666667 * 2.219640 ] / [ 2.219640 – 1]
M = 250,000 [ 0.0147977 ] / [ 1.219640 ]
M = 3699.425 / 1.219640
M ≈ $3,033.14
So, the estimated monthly payment for this SBA loan would be approximately $3,033.14.
Disclaimer: This calculator provides an estimate for principal and interest payments only. Actual loan payments may vary due to lender fees, SBA guarantee fees, insurance, taxes, or other charges. Always consult your loan agreement for precise payment details.
function calculateSbaRepayment() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermMonths = parseInt(document.getElementById("loanTermMonths").value);
var resultDiv = document.getElementById("result");
if (isNaN(loanAmount) || isNaN(annualInterestRate) || isNaN(loanTermMonths) ||
loanAmount <= 0 || annualInterestRate < 0 || loanTermMonths 0) {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths)) / (Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1);
} else {
// Handle case of 0% interest rate
monthlyPayment = loanAmount / loanTermMonths;
}
if (isNaN(monthlyPayment) || !isFinite(monthlyPayment)) {
resultDiv.innerHTML = "Calculation error. Please check your inputs.";
} else {
resultDiv.innerHTML = "Estimated Monthly Payment:$" + monthlyPayment.toFixed(2) + "";
}
}