Find out how much your loan will cost
Taking out a small business loan can help kick start or grow your business, but it is important to know what you're getting into before you borrow money.
Our small business loan calculator will give you an idea of how much it will cost to take out a loan. Adjust the term and add extra monthly payments to see how much of an impact you can have on repayment.
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Make data-informed decisions for your small business's financial future with our free Business Loan Calculator. Determine your payback amount, total costs, and the annual percentage rate (APR). Use these insights to track your loan's actual cost and budget to grow your business.
How To Use the Business Loan Calculator
To use the Business Loan Calculator, follow these steps:
1. Enter Your Information: Start by inputting the necessary information into the calculator. These include the loan amount, annual interest rate, and the loan’s term length. If you make additional monthly payments beyond the minimum amount, you can enter that in an optional field.
2. Calculate the Results: Once you enter the required information, click Calculate. The Business Loan Calculator will process the data and generate the results based on your inputs.
Understanding Your Results
Once the Business Loan Calculator generates your results, consider how that information may impact your financing needs. Here's some relevant terms:
Monthly Payment: This figure is the minimum amount you need to pay each month to adhere to the loan repayment schedule. It includes both the borrowed principal (initial) amount and the interest accrued.
Average Monthly Interest: The average monthly interest is the average amount of additional costs over the initial loan amount you agree to pay per month during the length of the loan.
Total Interest: This value represents the additional cost you’ll pay beyond the initial amount you borrowed.
Number of Years: The number of years refers to the loan’s term length. It indicates the time during which you are expected to make payments.
By understanding these key terms and what they mean for your loans, you can appreciate the financial implications of borrowing for your business.
Types of Business Loans
Business loans are vital for helping small businesses grow. Understanding your loan options will help you select one that will work for you. Here are the most common loans:
Term Loans: Borrow a fixed amount and repay it over time with fixed monthly payments. You’ll always know what you owe each month and can keep your expenses predictable. This is ideal for expansion, equipment, or working capital.
Equipment Financing: Secure funds specifically for purchasing or leasing equipment, use the purchased equipment as collateral.
Lines of Credit: Access a preset amount of funds. Similar to a credit card, you can use it as needed for a flexible source of immediate cash.
SBA Loans: Backed by the Small Business Administration, these loans have favorable terms and lower interest rates, but strict eligibility criteria.
Where To Get a Small Business Loan
There are many options for getting a small business loan. Traditional banks are a popular choice, offering competitive rates and flexible terms. There are a lot of them and since they’re established financial institutions, they can provide the stability and expertise you may want.
If you prefer a more community-oriented approach, credit unions are member-owned so they prioritize supporting local businesses. These institutions often have connections to the local market and can offer personalized service. Credit unions may also provide more flexible terms and lower fees compared to traditional banks.
Online lenders provide a convenient and streamlined experience, allowing you to access funds through their user-friendly platforms. These digital lenders have simplified the loan application process, often requiring less paperwork, and offering faster approval times. They are a great option if you prioritize speed and convenience in securing a small business loan.
To find the best loan for your small business, research and compare lenders. Evaluate their interest rates, terms, eligibility criteria, and the reputation of the lender. Taking into consideration this information, you can choose a lender and secure a loan that aligns with your business goals and financial needs.
Applying for a Small Business Loan
When you apply for a small business loan, make sure your paperwork is in order. First, familiarize yourself with the lender’s loan requirements, such as credit scores, time in business, and revenue thresholds. Next, make sure you have the necessary paperwork, including your financial statements, business plans, and tax returns. And, before you sign, review your lender’s repayment terms, including interest rates, and monthly payments.
By understanding what entering into a loan agreement means for your business, you increase your chances of securing the funding you need to take your business to the next level. At Shopify, we offer a small business funding solution through Shopify Capital. With Shopify Capital, you can get funding without lengthy application processes. Payments are flexible and tailored to fit your business's cash flow.
Start Planning Your Small Business's Financial Future Today
Plan your financial future today. Calculate your loan, unlock growth opportunities, and pave the way for a prosperous future. With our Business Loan Calculator, you can embrace the power of financial planning and see your business thrive.
The type of small business loan you can get depends on your individual needs, as well as the type of business you operate. Generally speaking, some of the most common types of small business loans are SBA loans, short-term loans, equipment loans, lines of credit, invoice factoring, and merchant cash advances.
They are dependent on many factors including the loan amount and the lender. Ultimately, it boils down to your financing needs, which will determine the loan type.
Here are some typical business loan types and their terms sorted from the shortest to the longest.
- - Invoice financing: One to three months
- - Short-term loans: Three to 18 months
- - Business lines of credit: Six months to five years
- - Equipment loans: One to five years
- - Microloans: One to six years
- - Term loans: One to ten years
- - SBA loans: Five to 25 years
The business loan term, which is the length of time within which you’re contractually obliged to pay off your debt, depends on whether you’re taking out a short-term or long-term loan.
Short-term loans, which tend to deal with loans of smaller amounts, are usually repaid within 1.5 years. Medium-term loans last between one and five years, and long-term loans can last up to 25 years.
On average, small business loans are applied at an interest rate of between 4% and 6%. However, these rates vary from lender to lender.
- - National banks (large): Between 2.55% and 5.14%
- - National banks (small) and regional banks: Between 2.48% and 5.4%
- - Foreign banks: Between 1.45% and 5.66%
- - Online or alternative lenders: Between 13% and 71%
The standard rates applied by banks lie around 2% to 6%. That said, anything toward the lower end of this range can be considered a good interest rate.
However, applying to a bank that offers low interest rates for business loans does not necessarily guarantee you a low rate. These rates are also determined by factors such as the loan term, the loan amount, and your credit history.
The success rate for a small business loan application varies from case to case and is also dependent on the lender.
Larger banks have lower approval rates of around 20% to 25%. In comparison, smaller banks approve around 50% of small business loan applications.
Your chances of securing a business loan are also influenced by other factors – principally, your credit report. Any records of late or non-debt payments will lower the likelihood of obtaining a bank loan for your small business.
There are many different money sources you can turn to to get your business up and running. These include:
- - Using your personal savings
- - Asking friends and family for personal loans
- - Getting a business loan from a bank
- - Applying for grants and programs
- - Pitching to venture capital and angel investors
- - Raising money through crowdfunding
An equipment loan is a loan taken out to purchase large, expensive pieces of equipment such as machinery, vehicles, or computers. It is typically used by businesses to purchase equipment that is necessary for their operations but that they do not have the funds to purchase outright. It is similar to a regular loan, but the funds are used exclusively to purchase equipment.
Yes, you can get a loan to buy equipment. The type of loan you can get will depend on the type of equipment you need, your credit score, and other factors. You can contact your local bank or credit union to discuss loan options.
If you’re looking to apply for small business loans that offer relatively shorter application times and higher approval rates, your best options are:
- - Invoice financing
- - Short-term loans
- - Business lines of credit
- - Microloans
However, keep in mind that there may be strings attached to receiving the loan quickly, which can include high rates and fees and less financial flexibility.