# What will my business loan cost?

Computes the payment, total cost, and APR of a fixed-rate business term loan paid monthly, every two weeks, weekly, or quarterly, with fees taken from the proceeds.

- Page: https://www.acalculator.org/finance/business-loan-calculator
- JSON spec: https://www.acalculator.org/finance/business-loan-calculator.json
- Version: b6ba6e758d02

## Default answer

Example with the default inputs (Loan amount $100,000.00, Interest rate 9%, Loan term (years) 5, Payments Monthly, Origination fee 2%, Other fees $0.00): A $100,000.00 business loan at 9% over 5 years is repaid with 60 payments of $2,075.84; with fees of $2,000.00, the APR is 9.87%.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| amount | Loan amount | The amount of the loan, before fees. |
| rate | Interest rate | The yearly interest rate. The rate per payment is this divided by the payments a year. |
| years | Loan term (years) | The length of the loan in years; decimals are allowed (1.5 is 18 months). |
| freq | Payments | How often you pay: 12, 26, 52, or 4 times a year. |
| fee | Origination fee | A fee charged as a percentage of the loan amount and taken from the money you receive. |
| other | Other fees | Other up-front fees in dollars (documentation, closing, packaging), taken from the money you receive. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| payment | Your payment | The level payment made at each payment date (monthly, weekly, and so on, as chosen). |
| apr | APR | The yearly rate at which the payments repay the cash you receive, so the fees count as a cost: the rate per payment times the payments a year. |
| payments | Number of payments | How many payments repay the loan. |
| cash | Cash you get | The loan amount minus the fees. |
| fees | Fees | The origination fee plus the other fees. |
| interest | Total interest | All the interest paid over the term. |
| paid | Total of payments | The loan amount plus all the interest. |
| cost | Cost of the loan | The total of payments minus the cash you get: the interest plus the fees. |

## Method

payment = L × i ÷ (1 − (1 + i)^−n), with i = rate ÷ payments a year and n = round(years × payments a year); the APR is (payments a year) × j, where j is the rate at which the n payments repay the loan minus its fees.

## Assumptions

- The rate is fixed; interest for each payment period is the balance times the rate divided by the payments a year.
- Payments are equal and made at the end of each payment period.
- Fees are paid up front out of the loan, so you receive the loan amount minus the fees.
- The APR follows the actuarial method of Regulation Z, with each payment period as the unit period.
- Values are not rounded to the cent between payments; only the display is rounded.

## Worked examples

1. amount = $100,000.00, rate = 9%, years = 5, freq = 12, fee = 2%, other = $0.00 gives payment = $2,075.84, fees = $2,000.00, cash = $98,000.00, apr = 9.867677%, interest = $24,550.13. Source: hand calculation in content.mdx; Python 3 in docs/progress/WP-31/python/business_loan.py.
2. amount = $50,000.00, rate = 12%, years = 2, freq = 52, fee = 3%, other = $500.00 gives payment = $541.32, payments = 104, fees = $2,000.00, apr = 16.252052%, cost = $8,297.16. Source: hand calculation in content.mdx; Python 3 in docs/progress/WP-31/python/business_loan.py.
3. amount = $250,000.00, rate = 8%, years = 10, freq = 4, fee = 0%, other = $0.00 gives payment = $9,138.94, apr = 8%, payments = 40, interest = $115,557.48. Source: hand calculation in content.mdx: with no fees the APR equals the rate.

## FAQ

### How is a business loan payment calculated?

Like any fixed-rate term loan: payment = L × i ÷ (1 − (1 + i)^−n), where L is the loan amount, i is the yearly rate divided by the number of payments a year, and n is the number of payments. $100,000 at 9% over 5 years, paid monthly, is $2,075.84 a month.

### Why does the APR matter if I already know the rate?

Fees such as an origination fee come out of the money you receive, but you still repay the full loan. The APR counts them: it is the yearly rate at which your payments repay only the cash you get. A 2% fee on the $100,000 loan above raises the APR from 9% to 9.87%.

### Do lenders have to tell me the APR on a business loan?

The federal Truth in Lending rules (Regulation Z) cover consumer credit and do not apply to credit for business purposes, so a lender may quote only a rate, a fee, or a factor rate. This page works out the APR the same way Regulation Z does for consumer loans, so you can compare offers on one scale.

### Does paying weekly cost more than paying monthly?

At the same yearly rate, weekly payments reach the lender sooner, so the interest is a little lower. Short-term business loans with weekly or daily payments often come with higher rates and fees, though, so compare the APR and the total cost, not the payment.

### What fees should I include?

Any fee you pay to get the loan: an origination or packaging fee, documentation and closing fees, or a guarantee fee the lender passes on. Enter a percentage fee as the origination fee and flat fees as other fees. Fees paid over time (a monthly service fee) are not included here.

### What if my loan has a balloon payment?

This page assumes the loan is fully repaid by equal payments. A loan with a balloon (a large final payment) has lower payments and a different APR. Ask the lender for its amortization period and term.

## Sources

- Regulation Z (Truth in Lending), 12 CFR 1026.3(a), exempt transactions: credit primarily for a business, commercial, or agricultural purpose. https://www.consumerfinance.gov/rules-policy/regulations/1026/3/
- Regulation Z, 12 CFR 1026 appendix J, Annual percentage rate computations for closed-end credit transactions (actuarial method). https://www.consumerfinance.gov/rules-policy/regulations/1026/j/
- U.S. Small Business Administration, Loans. https://www.sba.gov/funding-programs/loans
- Amortized loan payment (annuity) formula: S. A. Broverman, Mathematics of Investment and Credit, chapter 3.