Small Business Loan Comparison Calculator

This small business loan comparison calculator estimates the monthly payment and total interest for one fixed-rate loan using its principal, APR, and term. Enter the figures from a lender’s written offer; the results are arithmetic estimates, not a recommendation or a forecast of approval.

Formula

The calculator uses the standard fixed-payment amortization formula. It converts the annual percentage rate to a monthly rate, calculates the level monthly payment, rounds that payment to cents, and multiplies it by the number of monthly payments to estimate total interest.

• p = amount borrowed, in dollars.
• apr = annual percentage rate, entered as a percentage number, such as 8 for 8% per year.
• r = monthly interest rate, calculated as apr ÷ 1200.
• n = total number of monthly payments, calculated as years × 12.
• pmt = monthly payment in dollars: p × r ÷ [1 − (1 + r)⁻ⁿ]. The displayed result is rounded to cents.
• int = estimated total interest in dollars: (rounded pmt × n) − p.

The input APR must be above zero because the payment formula divides by the monthly rate. This means the calculator does not model an interest-free loan. It also assumes the same principal, APR, and payment schedule throughout the term.

Worked Example

Using the calculator’s default inputs—$20,000 borrowed, 8% APR, and a five-year term—first convert the APR to a monthly rate and the term to payment count:

• Monthly rate: 8 ÷ 1200 = 0.0066667, or about 0.66667% per month.
• Number of payments: 5 × 12 = 60.
• Payment before rounding: 20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)⁻⁶⁰] ≈ $405.53.
• Total of rounded payments: $405.53 × 60 = $24,331.80.
• Estimated total interest: $24,331.80 − $20,000 = $4,331.80.

The calculator displays a monthly payment of $405.53 and total interest of $4,331.80. Lenders may handle the final payment or rounding differently, so the calculator’s rounded-payment total can differ slightly from a lender’s repayment schedule.

Assumptions

• The interest rate is fixed for the entire term.
• Payments are monthly and made at the end of each period.
• Interest compounds monthly, using APR divided by 12.
• The estimate excludes origination or other fees, taxes, insurance, collateral costs, and any separate charges or required deposits.

How to Compare Small Business Loans

A payment calculation is one part of comparing offers, not a complete comparison. Loan structures can differ in repayment frequency, fees, collateral requirements, variable-rate terms, and whether the amount received is smaller than the stated principal after deductions. To compare like with like, confirm that each offer’s amount, APR, term, and payment schedule are represented consistently.

• Amount received: Check whether fees are taken out before funds reach the business. A $20,000 stated loan with $500 deducted does not provide $20,000 in usable cash.
• Rate type: A fixed APR stays unchanged under the calculator’s assumption. A variable rate can change, so a single fixed-rate estimate cannot project its future payments.
• Payment frequency: Weekly or daily payments are not equivalent to monthly payments merely because the total term is similar. Review the schedule and cash-flow impact separately.
• Fees and other charges: Ask for each charge and how it is collected. This calculator does not add fees to principal or calculate an all-in borrowing cost.
• Repayment conditions: Read the offer for payment dates, late-payment consequences, collateral, personal guarantees, and any early-payment terms. These are not reflected in the calculator.

For example, two offers might have the same principal and stated term but different fees or payment frequencies. This calculator can compare their fixed monthly principal-and-interest estimates only if each offer truly uses monthly level payments and the APR input matches the loan’s stated APR. It cannot determine which offer is appropriate for a particular business.

Using the Results in Cash-Flow Planning

The monthly payment is the amount predicted by this simplified amortization model, not a complete monthly cost of borrowing. Compare it with a cash-flow forecast that accounts for the timing of customer payments, payroll, inventory, rent, taxes, and other obligations. A business with seasonal income may need to examine payment dates and low-revenue periods rather than relying on an annual average.

Total interest is the modeled interest across all scheduled payments. It is not the total cost if there are fees, variable rates, payment changes, or penalties. A longer term generally means more scheduled payments; with the same principal and rate, extending the term ordinarily lowers the calculated payment but increases the time interest accrues. The calculator lets you inspect those mathematical effects by entering different terms, without judging whether a term fits your business.

Common Comparison Mistakes and Limits

• Confusing APR and a periodic rate: Enter the annual APR as a percentage, such as 8—not 0.08 and not the monthly rate. The formula divides by 1200 internally.
• Comparing different amounts: If one offer advances less cash after deductions, its payment alone does not show the cost of obtaining the same usable funds.
• Ignoring rounding: The calculator rounds the monthly payment to cents and uses that rounded amount to estimate total interest. Actual final-payment adjustments may vary.
• Treating an estimate as a quote: The calculator does not verify offer documents, fees, eligibility, or lender calculations.
• Applying it to non-level payments: Interest-only periods, balloon payments, irregular installments, revolving credit, and changing rates require a different model.

To compare a real offer, use the lender’s disclosed amount financed, APR, payment schedule, total repayment figure, and fee details. If the contract’s terms do not match fixed monthly amortization, this estimate will not reproduce the contract.

Frequently Asked Questions

How do I compare small business loans?
Compare the amount of usable funds, APR, payment amount and frequency, term, fees, rate type, collateral terms, and total repayment disclosures. Use this calculator only for the fixed-rate monthly-payment estimate it models.

What information do I need to compare loan payments?
For this calculation, enter the principal, annual APR, and term in years. To assess a full offer, also obtain its fees, net proceeds, payment schedule, rate-change terms, and total repayment figure.

Does the calculator include loan fees?
No. It calculates principal and interest from the entered amount, APR, and term. Fees or deductions can change both the amount received and the overall cost.

Can I compare a variable-rate loan with this calculator?
Only as a single-rate snapshot, not as a projection. The result assumes the APR remains fixed for every payment; it cannot model future rate changes.

Why might my lender’s payment differ?
The lender may use different payment dates, rounding, fees, a non-monthly schedule, a variable rate, or other contract terms. Check the written repayment schedule and disclosure for the exact figures.

This result is an estimate for educational arithmetic; the lender’s disclosure gives the exact figures.

Related

• Karma Loan Comparison Calculator
• Loan and Debt Comparison Calculator
• Jumbo Loan Rates Comparison: How to Compare Offers

in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2