Business Term Loan Calculator
Origination fees roll into the real APR.
Most lenders quote a rate and bury the fee. We expose the effective APR so you know what the loan actually costs. Enter amount, rate, fee, and term. See monthly payment, net proceeds, and approval odds.
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Approval Odds & Expected Rate
—Effective APR: The Number Lenders Don't Quote
When a business lender says "10.5% APR" on a $100,000 loan with a 4% origination fee, they're telling you about the interest rate — not the cost of the loan. You receive $96,000 in proceeds but owe interest on the full $100,000. Once you compute the real yearly cost, that "10.5%" is closer to a 12.6% effective APR. On shorter-term loans, the gap is even bigger because the fee amortizes over fewer months.
Our calculator runs the Newton-Raphson root-finder on the cash-flow equation: given that you received netProceeds today and will make n monthly payments of M, what's the discount rate that makes net present value equal to zero? That's the effective APR. The TILA-standard definition.
What Drives Your Rate
- Time in business. Banks want two years minimum. Online lenders will fund at six months but charge double-digit APRs above 20%.
- Personal credit of the owners. Bank term loans require 680+ FICO on the owners. Online alternatives will take 580 at much higher cost.
- Business revenue and DSCR. Debt service coverage ratio = annual net operating income / annual debt service. 1.25 is the bank threshold.
- Industry risk. Restaurants, trucking, construction, and gig-economy services carry lender surcharges of 1–3 points.
- Collateral. A UCC-1 blanket lien on business assets can drop your rate 2–3 points. A personal guarantee is nearly always required either way.
Term Loan vs. SBA vs. MCA
A conventional bank term loan is the gold standard: 6–12% rates, 3–10 year terms, UCC-1 plus personal guarantee. An SBA 7(a) or 504 is government-guaranteed, longer-term (10–25 years), and lower rate (~prime + 2.75%), but requires more paperwork and 2+ months to close. A merchant cash advance is the option of last resort: fast cash against future credit-card receipts at effective APRs of 50–150%.
A Worked Example
$150,000 at 11.5% quoted rate with a 3% origination fee, 5-year term:
- Net proceeds: $145,500 (you receive $150k minus $4,500 fee)
- Monthly payment: $3,300 (amortized on the full $150k)
- Effective APR: 13.0% — 1.5 points above the quoted rate
Common Pitfalls
- "Total cost of capital" framing. Some lenders multiply rate × years to quote a total cost of 55%. Divide by term to see the effective annual rate — usually much closer to 11–12% than the scary-sounding 55%.
- Daily or weekly payments. A "daily debit" schedule means the lender pulls money from your bank account every business day. Great for the lender's cash flow, rough on yours. Ask for monthly if you can get it.
- Prepayment penalties. Some term loans charge 3–5% of remaining balance for early payoff. If you expect to refinance or pay early, negotiate this out before signing.
Frequently Asked Questions
What's the difference between APR and factor rate?
APR expresses cost as an annualized percentage. Factor rate is a flat multiplier (1.3×, 1.4×) common in merchant cash advances and short-term loans. A factor of 1.3 on a 9-month term is roughly a 67% APR. Always convert to APR before comparing.
Will the SBA guarantee every loan?
No. SBA 7(a) guarantees are capped at $5M. SBA 504 is for real estate and equipment up to $5.5M. Many small business loans are too small or too quick to make SBA paperwork worthwhile.
Do I need to personally guarantee a business loan?
Almost always, yes — especially for anything under $500k. A personal guarantee means if the business can't pay, the lender can pursue your personal assets. It's negotiable for very large, well-collateralized loans but nearly universal below that threshold.