How is a business loan payment calculated?

Most term business loans use an amortizing payment formula. The payment is based on the loan amount, interest rate, payment frequency, and number of payments. Each payment includes both interest and principal, and the interest portion declines over time as the balance is paid down.

What is a good interest rate for a business loan?

Rates vary widely by lender, collateral, and your credit profile. Bank and SBA-backed loans may be in the mid-single to low double digits, while online lenders and merchant cash advances can be much higher. Always compare the APR and total cost, not just the nominal rate.

What is a balloon payment on a business loan?

A balloon payment is a large lump-sum payment due at the end of the loan. During the term you may pay only interest or a reduced principal amount, then pay the remaining balance in one payment at maturity. This calculator lets you model an optional balloon as a percentage of the original loan.

How do origination fees affect my business loan?

Origination fees are usually charged as a percentage of the loan amount. They increase your upfront cost and your effective APR. This calculator lets you include an origination fee and shows both the financed amount and the true cost including fees.

Business Loan Calculator: Payments, Total Interest & Amortization

#	Payment	Interest	Principal	Balance
Click “Calculate” to generate the amortization schedule.

How the business loan calculator works

This tool models a standard amortizing business term loan, similar to what you might get from a bank, SBA lender, or online lender. You can also approximate interest-only structures and balloon loans.

Amortizing payment formula

The regular payment for a fully amortizing loan is calculated using the standard formula:

Let:

P = loan principal (amount borrowed)
r = periodic interest rate (annual rate / payments per year)
n = total number of payments

Then the payment PMT is:

\[ PMT = P \times \frac{r(1+r)^n}{(1+r)^n - 1} \]

Each payment is split into interest and principal. Interest is calculated on the outstanding balance; the rest reduces the principal.

Balloon and interest-only options

Balloon payment – You can set a balloon as a percentage of the original loan (for example, 20%). The calculator then amortizes only the non-balloon portion and adds the balloon as a lump sum at the end.
Interest-only – If you enable “Interest-only payments until balloon,” regular payments cover interest only and the full principal (or balloon portion) is due at maturity.

Effective APR and total cost

Origination fees increase your true borrowing cost. The calculator:

Computes the fee as a percentage of the loan amount.
Shows your total cost (interest + fees).
Estimates an effective APR by solving for the internal rate of return (IRR) of the cash flows (net proceeds vs. payments and balloon).

How to use this business loan calculator

Enter the loan amount you plan to borrow.
Set the interest rate (APR) quoted by the lender.
Choose the term in years or months and select the payment frequency.
Add fees or balloon if your offer includes an origination fee or a final balloon payment.
Click Calculate to see your payment, total interest, and amortization schedule.
Use the Scenario comparison tab to see how changing the term or rate affects your costs.

Interpreting the results

Payment amount – What you’ll pay each period (monthly, weekly, etc.).
Total interest paid – The sum of all interest over the life of the loan.
Origination fee – Upfront fee based on the percentage you entered.
Balloon payment – The lump sum due at the end, if any.
Total cost – Interest plus fees; this is the true dollar cost of borrowing.
Effective APR – A rate that reflects both interest and fees, useful for comparing offers.

Tips before taking a business loan

Match term to asset life – Finance long-lived assets (like equipment or real estate) with longer terms; use shorter terms for working capital.
Compare APR, not just rate – Fees and compounding can make a “low rate” loan more expensive than it appears.
Stress test your cash flow – Use the comparison tab to see if you can handle higher rates or shorter terms.
Check covenants and prepayment penalties – These can limit flexibility or increase your cost if you repay early.

FAQ

What types of business loans does this calculator cover?

This calculator is ideal for fixed-rate term loans: bank loans, SBA 7(a)-style loans, equipment financing, and many online business loans. It is not designed for merchant cash advances or revolving lines of credit, which have different fee structures.

Can I use this for SBA loans?

Yes. SBA loans are typically amortizing term loans with regular payments. Enter the SBA interest rate, term (often 7–10 years for working capital, longer for real estate), and any fees to approximate your payment and total cost.

Why is the total interest so high on long terms?

Longer terms reduce your payment but increase the number of payments, so interest accrues over more periods. Shortening the term usually raises the payment but can dramatically reduce total interest.

Does this calculator include taxes or insurance?

No. It focuses on the loan itself: principal, interest, and fees. Any taxes, insurance, or other operating costs for your business should be added separately to your cash flow projections.

Business Loan Calculator

Summary

Principal vs. interest

Current scenario

Shorter term (−2 yrs)

Higher rate (+2%)