How a Business Loan Calculator Works: Payment, Interest, and True Cost
Every fixed-rate term loan follows one formula: M = P × i ÷ (1 − (1 + i)^−n), where P is the amount borrowed, i is the monthly rate (annual rate ÷ 12), and n is the number of monthly payments. On $100,000 at 10% for 60 months, i = 0.008333 and M = $2,124.70. Total repayment is $127,482, so interest is about $27,482.
The interest rate alone understates cost. A 3% origination fee ($3,000) is deducted from the money you receive, so you pay the same $2,124.70 a month on only $97,000 of proceeds. Solving for the rate that equates those payments to $97,000 gives a fee-inclusive APR of about 11.3%. Compare lenders on that figure, not the headline rate.
| $100,000, 5 years | Payment | Total interest | True APR |
|---|---|---|---|
| 10%, no fee | $2,124.70 | $27,482 | 10.0% |
| 10%, 3% fee | $2,124.70 | $27,482 + $3,000 fee | ≈11.3% |
Paying extra principal shortens the term and cuts interest, because each extra dollar stops accruing interest immediately. The calculator shows the months and interest saved. Check your loan agreement first: some business lenders charge prepayment penalties.
Business Loan Interest Rate in October 2026: Prime, SBA Caps, and Online Lenders
Most variable business loans price off the WSJ prime rate, which equals the top of the Federal Reserve's federal funds target range plus 3 points. The Fed raised its range to 3.75%–4.00% on September 16, 2026, which moved prime to 7.00%. The Fed held the range on October 28, though two members voted to raise it again.
The SBA does not set your rate; it sets a ceiling, and the lender negotiates beneath it. For variable-rate 7(a) loans the ceiling is the base rate plus a spread that shrinks as the loan grows (table above). SBA guarantees cover up to 85% of loans of $150,000 or less and up to 75% above that, with a $5 million maximum, and every owner of 20% or more must sign a personal guaranty. Online and alternative lenders are not capped this way; NerdWallet reports their rates range from 14% to 99%. Use the button in the calculator to test the 7(a) ceiling for your amount.
Rates move with prime, so a variable-rate payment can rise after your loan closes. Run the calculator at one or two points above your quoted rate to see whether the payment still fits your cash flow.
How to Get a Business Loan: Step-by-Step
- Calculate your DSCR. DSCR = annual net operating income ÷ annual loan payments. Lenders commonly look for at least 1.25, meaning income covers payments 1.25 times. The calculator computes it from your inputs.
- Check credit. Lenders review personal credit for owners and, where it exists, business credit. Fix errors before applying; each lender inquiry can leave a mark.
- Assemble documents. Expect to provide two to three years of tax returns, year-to-date profit and loss, balance sheet, bank statements, a debt schedule, and a plain-language use of funds.
- Compare on APR. Request the rate, term, every fee, and any prepayment penalty in writing, then enter each offer here.
- Match term to purpose. Finance equipment over its useful life, working capital over months, and real estate over decades. Borrowing short-term money on a long loan, or the reverse, strains cash flow.
How to Get a Small Business Loan or a Startup Business Loan With No Money
A true no-money, no-collateral startup loan is rare. Lenders need a repayment source, which for a new company usually means the owner's credit, personal guaranty, or collateral. Realistic paths include:
- SBA microloans, up to $50,000, made through nonprofit intermediaries that often serve newer businesses.
- Equipment financing, where the equipment secures the loan.
- Business credit cards for small, short-term needs, at the cost of high variable APRs.
- Personal savings or a co-signer, which many lenders expect as owner equity regardless.
On grants: the SBA does not provide grants to start or expand a business. Be cautious with offers claiming otherwise; legitimate grants usually come from state or local programs and nonprofits and target specific purposes.
Factor Rates vs. APR: Why Merchant Cash Advances Cost More Than They Look
A factor rate multiplies the advance to set total repayment: Repayment = Advance × Factor. A 1.30 factor on $50,000 means $65,000 back, a $15,000 cost. That sounds like 30%, but it is repaid over six months, not a year, and in frequent installments. Solving for the rate gives an APR of roughly 97%. The same $15,000 cost spread over three years would be far cheaper per year. Convert any factor-rate offer with the tool in the calculator before you compare it to a term loan.
Is Business Loan Interest Tax Deductible?
Interest paid on a loan used for business purposes is generally deductible as a business expense, subject to the limits in Internal Revenue Code Section 163(j) that apply to larger businesses. Principal repayments are not deductible. Origination fees are usually amortized over the loan term. Confirm treatment with a tax professional.
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Frequently Asked Questions
How do I calculate a business loan payment?
Use M = P × i ÷ (1 − (1 + i)^−n). A $100,000 loan at 10% for 5 years has a $2,124.70 payment and about $27,482 in interest.
What is a good business loan interest rate in October 2026?
With prime at 7.00% since September 17, 2026, SBA 7(a) variable rates are capped at 13.50% for $50,000 or less, 13.00% up to $250,000, 11.50% up to $350,000, and 10.00% above. Online lenders can cost far more.
How do I get a small business loan?
Check credit, document revenue and cash flow, calculate your DSCR (commonly 1.25 or higher), compare lenders on APR, and submit financial statements, tax returns, and a use-of-funds plan.
Can I get a startup business loan with no money?
Rarely. Consider SBA microloans up to $50,000, equipment financing, or business credit cards. The SBA does not offer grants to start or expand a business.
How do I convert a factor rate to APR?
Multiply the advance by the factor for total repayment, divide by the number of payments, and solve for the rate. A 1.30 factor on $50,000 over 6 months is roughly 97% APR.
Independent developer and economics researcher at Bhattadev University specializing in public finance, econometrics, cross-border invoicing, and global fiscal frameworks.
Educational tool, not financial, tax, or legal advice. Your lender's disclosure controls actual rates, fees, and terms. Sources: SBA (sba.gov, 13 CFR 120.214), Federal Reserve FOMC statements, NerdWallet SBA rate tables.