1. What is the Business Loan Payment Formula?

The PMT formula calculates the fixed monthly payment required to repay a business loan over a specified term, including interest. It's the standard calculation used by Commonwealth Bank and other financial institutions for business loans.

2. How Does the Calculator Work?

The calculator uses the PMT formula:

Where:

• \( P \) — Principal loan amount (AUD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)
• \( PMT \) — Monthly payment amount (AUD)

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that covers both principal and interest each month.

3. Importance of Loan Payment Calculation

Details: Accurate payment calculation helps businesses plan cash flow, compare loan options, and determine affordability before committing to a loan.

4. Using the Calculator

Tips: Enter the loan amount in AUD, annual interest rate as a percentage (e.g., 5.25 for 5.25%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include Commonwealth Bank's fees?
A: No, this calculates principal and interest only. Additional fees may apply to actual business loans.

Q2: What's a typical business loan term?
A: Commonwealth Bank business loans typically range from 1-10 years, with some up to 30 years for commercial property.

Q3: How does interest rate affect payments?
A: Higher rates increase monthly payments significantly over the loan term. A 1% rate difference can substantially impact total repayment amount.

Q4: Can I calculate fortnightly payments?
A: For fortnightly payments, divide the monthly amount by 2 and adjust the term to fortnightly periods (n = years × 26).

Q5: Are there prepayment options?
A: Commonwealth Bank may allow extra repayments on some business loans, which would reduce total interest paid.