In Short
A $100,000 business loan at 10% for 5 years is $2,124.70 a month. With a 3% origination fee you receive $97,000, so the true APR is about 11.32% and the total cost is $30,482. A merchant cash advance with a 1.3 factor over 6 months costs $15,000 on $50,000, which works out to an APR above 100%.
How to Use the Business Loan Calculator
- Choose how the loan is priced: an interest rate, or a factor rate for merchant cash advances and many short-term loans.
- Enter the amount, the rate or factor, the term and any origination or other up-front fees.
- Pick how often you pay: monthly, weekly or every business day.
- Optionally add your annual net operating income to see your debt service coverage ratio (DSCR).
- Or tap Say It All: “Borrow 50 thousand at 9 percent over 3 years, with a 3 percent origination fee, paid weekly.”
The Formula
Fees taken out of the loan mean you receive less than you repay on, so the true rate is higher than the quoted one. The calculator finds the rate that makes your payments worth exactly what you receive (an internal rate of return) and annualizes it.
- Payment (interest rate) = amount × r ÷ (1 − (1 + r)^−n), r = rate ÷ payments per year
- Payment (factor rate) = amount × factor ÷ n
- You receive = amount − fees
- APR = the periodic rate i where you receive = payment × (1 − (1 + i)^−n) ÷ i, × payments per year
- DSCR = annual net operating income ÷ annual loan payments
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| Bank term loan | $100,000 at 10%, 5 years, 3% fee, monthly | $2,124.70/mo · total cost $30,482.27 · APR ≈ 11.32% |
| Online lender, weekly | $50,000 at 9%, 3 years, 3% fee, weekly | 156 × $366.00 · total cost $8,596.38 · APR ≈ 11.13% |
| Merchant cash advance | $50,000, 1.3 factor, 6 months, 2% fee, daily | 126 × $515.87 · total cost $16,000 · APR ≈ 118% |
| DSCR check | $250,000 at 11.5%, 10 years, 2.5% fee; NOI $60,000 | $3,514.89/mo · $42,179 a year · DSCR 1.42× |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
What Is the Real APR on a Business Loan?
The interest rate is only part of the cost. The APR adds fees such as origination charges, which is why it is the better number for comparing offers [4]. When a fee comes out of the loan, you pay interest on money you never received: a 3% fee on a 5-year, 10% loan adds about 1.3 points to the APR.
Short terms make fees and factor rates look smaller than they are. A 1.3 factor sounds like 30%, but repaid over six months of daily debits it is more than 100% a year, because you start paying it back the day after you get it.
What Is DSCR and Why Do Lenders Use It?
The debt service coverage ratio compares the cash your business earns with the loan payments it has to make. A DSCR of 1.0 means income exactly covers the payments; below 1.0 it doesn't.
Many lenders look for about 1.25× or more as a rule of thumb, and each lender sets its own standard and counts all of your debts. The calculator shows the ratio for this one loan, as an educational check.
How Big Can an SBA Loan Be?
SBA 7(a) loans go up to $5 million, and SBA Express loans up to $500,000. For a variable-rate 7(a) loan, the SBA caps the rate at the base rate plus 6.5% for $50,000 or less, 6% up to $250,000, 4.5% up to $350,000 and 3% above that. Real estate terms run up to 25 years, and equipment and working capital usually up to 10 [1][3].
SBA 504 loans, for major fixed assets such as buildings and equipment, go up to $5.5 million with 10-, 20- or 25-year terms and a fixed rate tied to 10-year U.S. Treasury rates [1][2].
Frequently Asked Questions
What is the payment on a $100,000 business loan?
At 10% for 5 years it's $2,124.70 a month. At 11.5% for 10 years it's $1,405.96 a month. Weekly or daily plans split the cost into more, smaller payments.
How do I convert a factor rate to an APR?
Multiply the amount by the factor to get the payback, spread it over the payments, then find the yearly rate those payments imply. $50,000 at a 1.3 factor over 6 months of daily payments, with a 2% fee, is about 118% APR.
What DSCR do lenders want?
Many lenders look for 1.25× or more: $1.25 of net operating income for every $1 of loan payments. Each lender sets its own standard, so this is a rule of thumb, not a rule.
What is the maximum SBA 7(a) loan?
$5 million for most 7(a) loans and $500,000 for SBA Express. 504 loans go up to $5.5 million [1].
Why is my APR higher than my interest rate?
Because the APR includes fees such as origination charges. If the fee comes out of the loan, you receive less but repay the full amount, which raises the true rate [4].
Sources
- Terms, conditions, and eligibility (7(a), 504 and Microloan programs) — U.S. Small Business Administration
- 504 loans — U.S. Small Business Administration
- 7(a) loans — U.S. Small Business Administration
- What is the difference between a loan interest rate and the APR? — Consumer Financial Protection Bureau
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.