How to use this calculator
Enter four details from a loan offer.
- Loan amount: the amount you borrow and repay.
- Interest rate: the yearly rate the lender charges on the balance.
- Term (years): how long you have to repay.
- Origination fee %: a one-off fee for setting up the loan, charged as a percentage of the loan amount. Enter zero if there is none.
The calculator returns the monthly payment, the origination fee in dollars, the total interest, the total cost of borrowing and the effective APR including the fee.
Worked example
These are the starting values in the calculator above and the results they give. Change any input to see your own numbers.
- Loan amount
- $100,000
- Interest rate
- 9%
- Loan term
- 5 years
- Origination fee
- 2%
- Monthly payment
- $2,075.84
- Origination fee
- $2,000
- Total interest
- $24,550
- Total cost of borrowing
- $26,550
- Effective APR
- 9.87%
How business loan cost is calculated
The monthly payment uses the standard formula for a repayment loan. Every payment is the same, and the balance reaches zero at the end of the term. Early payments are mostly interest and later ones are mostly principal. The amortization guide explains why.
Total interest is the sum of all the monthly payments minus the loan amount.
The origination fee is the loan amount multiplied by the fee percentage. A 2% fee on a $50,000 loan is $1,000.
The total cost of borrowing is total interest plus the origination fee.
The effective APR turns the interest and the fee into one yearly rate. The fee is treated as a cost paid at the start, so the cash you actually get to use is the loan amount minus the fee, while the payments are still based on the full loan amount. The effective APR is the rate that links those payments to that smaller sum.
M = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)- M
- monthly payment
- P
- loan amount
- r
- monthly interest rate, the yearly rate ÷ 12, as a decimal
- n
- number of monthly payments, the term in years × 12
- P × fee %
- origination fee
- M × n − P
- total interest
How to read the results
The effective APR is the fairest number for comparing offers. A loan with a low interest rate and a large fee can cost more than one with a higher rate and no fee. The APR calculator lets you check a single offer in more detail.
- The fee weighs more on short loans. The same fee spread over fewer years adds more to the yearly rate.
- A longer term lowers the payment and raises the total. You pay less each month but pay interest for more months.
- Check the payment against your cash flow. A payment that looks fine in a good month can strain a slow one.
Lenders also test whether your income covers the payments. Many look for income of around 1.25 times the yearly loan payments, though this is a rule of thumb that varies by lender. You can run that test with the DSCR calculator.
The results assume a fixed interest rate, equal monthly payments and no other charges. Some loans have variable rates, weekly or daily repayments, early repayment charges or extra fees, so the lender's own figures may differ. Use this as an estimate for comparing options, not as a quote.
Frequently asked questions
How is a business loan payment calculated?
Most term loans use an amortization formula that produces equal monthly payments. Each payment covers the interest owed for that month, and the rest reduces the balance. Because the balance falls over time, the interest portion shrinks and the principal portion grows. The payment depends on three things: the amount borrowed, the interest rate and the length of the term.
What is an origination fee on a business loan?
An origination fee is a one-off charge a lender makes for processing and setting up a loan. It is usually stated as a percentage of the loan amount and is often taken out of the money you receive. That means you get less cash than you borrow but repay the full amount, which raises the true cost of the loan.
What is the difference between interest rate and APR?
The interest rate is the yearly cost of borrowing the money, applied to the balance. APR, or annual percentage rate, also folds in fees such as an origination fee, so it reflects the whole cost of the loan as a yearly rate. When a loan has fees, the APR is higher than the interest rate. APR is the better figure for comparing offers.
How much business loan can I afford?
A common approach is to work backward from cash flow. Lenders often want yearly income available for debt to be around 1.25 times the yearly loan payments, though the exact requirement varies. Estimate the income your business reliably produces after operating costs, then test loan amounts until the payment leaves a cushion you are comfortable with in a slow month.
Does a longer loan term cost more?
Usually, yes. A longer term lowers the monthly payment because the balance is repaid more slowly. But you then pay interest for more months and on a higher average balance, so total interest goes up. A shorter term costs less overall but needs a larger payment each month. The right choice balances total cost against what your cash flow can carry.
This calculator gives estimates for education only. It does not know your full situation and is not financial advice. Reviewed and updated November 15, 2026.