Business Loan Calculator

How Business Loan Calculator Works

M = P × r / (1 − (1 + r)^−n)

M

Monthly Payment — The fixed payment due each month covering both principal and interest portions of the loan.

P

Principal — The total loan amount borrowed before any fees or adjustments.

r

Monthly Interest Rate — The annual interest rate divided by 12. This is the periodic rate applied to the outstanding balance each month.

n

Number of Payments — The full loan term in months. A 5-year loan has 60 payments; a 10-year loan has 120 payments.

DSCR

Debt Service Coverage Ratio — Net Operating Income divided by Monthly Debt Payment. This is the key metric lenders use to assess whether your business generates enough cash flow to comfortably service the proposed debt.

Source: Standard loan amortization formula (PMT formula) used by CFPB, SBA, and all major commercial lenders. DSCR methodology per SBA Standard Operating Procedure 50 10 7.

How to Use

1. Enter the loan amount you need to borrow for your business.
2. Select the loan term — longer terms lower monthly payments but increase total interest paid over the life of the loan.
3. Enter the annual interest rate — compare SBA, bank, and online lender rates.
4. Add an origination fee percentage if applicable (common with SBA loans and online lenders).
5. Optionally enter your monthly Net Operating Income to see your DSCR and assess the likelihood of lender approval.

Quick Reference

Common Uses

• •Determine whether your business qualifies for an SBA or traditional bank loan by calculating your debt service coverage ratio.
• •Compare loan offers from different lenders by evaluating the total cost including origination fees and interest rates.
• •Plan business expansion by modeling how a new loan payment fits within your current net operating income and cash flow.

Understanding the Result

Worked Examples

Frequently Asked Questions

What DSCR do most lenders require for a business loan?

Most traditional banks and SBA lenders require a minimum DSCR of 1.25, meaning your net operating income must be at least 25% higher than your proposed monthly debt payments. Some lenders may accept a DSCR as low as 1.15 for otherwise strong borrowers with good credit and collateral. Online lenders may be more flexible on DSCR but typically charge higher rates. A DSCR above 1.50 significantly improves your negotiating position for better terms.

How does an origination fee affect my true cost of borrowing?

An origination fee is deducted upfront from your loan disbursement, so you receive less cash than the total loan amount — but you still repay the full principal plus interest. This increases your effective APR above the stated interest rate. For example, a $250,000 loan with a 2% origination fee means you receive $245,000 but must repay the full $250,000 plus interest over the loan term. Always compare APRs (which include fees by law), not just stated rates.

What is the difference between an SBA loan and a conventional business loan?

SBA (Small Business Administration) loans are partially guaranteed by the federal government, which allows lenders to offer lower rates (typically 5-10%) and longer terms (up to 25 years for real estate, 10 years for working capital). The trade-offs include more extensive paperwork, longer approval times (often weeks or months), and stricter eligibility requirements including personal guarantees. Conventional bank loans are faster but require stronger credit and collateral. Online business lenders offer the fastest funding but charge significantly higher rates, often with APRs of 15-40% when all fees are included.

What counts as Net Operating Income for DSCR calculation?

NOI for DSCR typically includes EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) adjusted for owner compensation and non-recurring items. Lenders use your business tax returns and financial statements to calculate this — not your internal P&L. They will add back depreciation, amortization, interest expense, and sometimes owner salary or distributions to arrive at a normalized cash flow figure. Your stated NOI should be conservative; lenders will recalculate it anyway.

Should I choose a longer loan term to lower my monthly payment?

A longer term lowers monthly payments and improves DSCR, but increases total interest significantly. For example, extending a $250,000 loan at 8.5% from 5 to 10 years drops payments from $5,129 to $3,099 but adds roughly $67,000 in extra interest. Choose the shortest term you can comfortably afford with a DSCR above 1.25. Some lenders will let you make extra principal payments without penalty to pay off early.

Pro Tips

• →A DSCR above 1.50 gives you negotiating leverage — ask for a lower rate, reduced origination fee, or longer term to improve cash flow.
• →SBA 7(a) loans cap interest rates (prime + 2.25-4.75% depending on loan size) and origination fees (3% max for SBA-guaranteed portion) — always compare against SBA caps.
• →When comparing loan offers, always look at the total cost including ALL fees, not just the stated interest rate. A loan with a lower rate but higher fees can cost more overall.
• →If your DSCR is below 1.25, consider a longer loan term to lower monthly payments and improve your ratio, or increase your NOI before applying.

Limitations to Know

• •DSCR is calculated using your stated NOI — lenders will verify through tax returns, bank statements, and financial statements. Actual verified NOI may differ from your estimate.
• •Origination fees, guarantee fees (SBA), packaging fees, and closing costs vary by lender and are not fully enumerated here — request a complete fee schedule before committing.
• •Loan approval depends on factors beyond DSCR: personal credit score, time in business, collateral, and industry risk. A good DSCR is necessary but not sufficient for approval.

Sources

• US Small Business Administration — Loan Programs
• Consumer Financial Protection Bureau — Small Business Lending