How to use it
- Enter the loan amount, the rate from your offer, and the term in years and months.
- Choose monthly or weekly payments to match the lender.
- Add the origination fee as a percent or a flat amount to see the effective APR.
- Try an extra monthly payment to see how much sooner you're done and how much interest you save.
The payment formula
Payment = P × r ÷ (1 − (1 + r)^−n)P is the amount borrowed, r is the rate per period (annual rate ÷ 12 for monthly), and n is the number of payments. Each payment covers that period's interest first. The rest pays down principal, so early payments are mostly interest and later ones mostly principal.
How fees change the real cost
An origination fee is usually taken out of the loan, so you receive less cash but repay the full amount. The effective APR is the rate at which your payments add up to the cash you actually got. Borrow $100,000 at 8% over 5 years with a 3% fee: you receive $97,000, pay $2,027.64 a month, and the effective APR is about 9.3%.
Typical small-business financing
| Type | Typical APR | Term |
|---|---|---|
| Bank term loan | 7%–12% | 1–10 years |
| SBA 7(a) | Prime + 3%–6.5% cap | up to 10 years (25 for real estate) |
| Equipment financing | 6%–20% | 2–7 years |
| Online term loan | 15%–50%+ | 6 months–5 years |
| Merchant cash advance | 40%–150%+ equivalent | 3–18 months |
Ranges are rough and shift with rates and credit. Always compare offers on APR, not the headline rate or factor rate.
Can the business carry it?
DSCR = Net operating income ÷ Annual debt paymentsUse your profit and loss statement for operating income (add back depreciation and the interest on this loan). Lenders usually want 1.25 or more. Your balance sheet shows how much debt is already on the books.
Warning signs in a loan offer
- A “factor rate” (like 1.3) with no APR disclosed.
- Daily or weekly debits that would strain your cash in a slow month.
- Prepayment penalties or “no discount for early payoff” terms.
- A confession of judgment clause or a blanket lien on all business assets for a small loan.
- Pressure to sign the same day.