By Fernando Berrocal

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Small business loans can assist startup owners in effectively launching their brand-new business. The extra working capital from loans can help with covering day-to-day expenditures, growing your business, or dealing with unexpected cash flow issues.  Business loan calculators can help you gauge your likelihood of finding one, estimate the right monthly payment, and evaluate the overall benefits of business loans for your startup.

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What is a Calculator for Business Loans?

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Several lenders and financial magazines provide business loan calculators on their websites. Some Small Business Administration lenders, for example, provide specific SBA loan rate calculators to potential applicants. They might even be able to show you rates for other loan types, such as the SBA 504 loan vs. the 7(a) loan. These calculators can help you streamline your loan search and make an informed selection–one that might save you hundreds or even thousands of dollars in the long run.

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How to Use a Loan Calculator for a Small Business:

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While each small business loan calculator is different, most of them ask for the same information. Before you get started, it’s a good idea to gather information such as:

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• Business loan amount (or how much you’re borrowing)
• Rate of interest
• The length of time you have to repay your loan (referred to as the loan term)
• Extra monthly loan payment amount (if you think you’ll pay more than the minimum)

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Simply enter this information into the calculator and submit.  Don't worry if you don't have exact numbers; a small business loan calculator is meant to offer you a rough estimate–not the actual cost of your loan. You won't know any precise costs until you apply for a loan and get approved.  A loan calculator can also help you figure out how changing rates, periods, and payments will affect the overall cost of borrowing.  Thus, it will be easy for you to choose between a few loans; the best deal will be highlighted.

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What a Small Business Loan Calculator Can Teach You:

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Sometimes, business loan calculators can tell you much more than the total cost of a prospective loan. Some calculators are more comprehensive than others and might offer you additional useful data.  Examples of this helpful info include: if a monthly payment fits into your business budget, whether it's worth searching around for a cheaper interest rate, the best payback period for your individual needs, and more.  Using one of these expanded calculators can provide you with a wealth of information that would be difficult to collect and calculate manually.

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Factors Affecting the Cost of Your Loan:

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When comparing options for your ideal business loan, it's critical to understand what determines your final loan cost. The following are the most important factors when determining the pros and cons of obtaining a loan for your startup:

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1. ‍Amount of the Loan: The more money you borrow, the higher the cost of your loan. Don't overextend yourself; this is the most important aspect of the overall cost of your loan. Only take out as much business funding as you require. If you're not sure how much money you'll need, a business credit line can be a good option. You can withdraw as much or as little as you like - up to a set credit limit - with this option.  You will only pay interest on the amount borrowed.

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2. Interest Rate: The amount of interest you pay when borrowing money is referred to as the interest rate. It has a significant impact on your loan's total cost. For instance, you may save thousands of dollars by taking out a loan with a 4% interest rate rather than a 14% interest rate. This rate that you obtain can be influenced by many factors, such as your credit rating, loan amount, loan term, revenue, etc.  Low interest rates are often a reflection of good credit scores and longer records of business activity.  If the interest rates you've been offered aren't to your liking, a good strategy is attempting to repair your credit (and applying for a loan once it improves.)

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3. Fees: Borrowers are charged loan fees by the majority of lenders. While costs vary by lender, the following are the most common: 

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• Origination fees
• Fees for processing
• Fees for late payments
• Fees for insufficient cash

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These fees might be set at a fixed rate or as a percentage of your overall bill. They're frequently included in monthly payments. If you come across a "no-fee” lender, be cautious; these banks sometimes compensate for their lack of costs by charging exorbitant interest rates.

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Before finalizing any offers to borrow money, check a business loan calculator.  It only takes a few moments, and can be a pivotal tool in your search for funding. You can even utilize a few different calculators to compare as many estimates as possible.  Business loan calculators help remove the guesswork from calculating the overall cost of borrowing, and provide a clearer sense of the alternatives available to you.

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Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

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