What is a business term loan?

A business term loan is a lump-sum loan to a business that is repaid over a fixed period (typically 1–10 years) with regular monthly payments. The funds can be used for working capital, equipment purchases, expansion, hiring, inventory, or other business needs. Business term loans differ from SBA loans in that they are not government-guaranteed — the lender takes on the full risk. As a result, rates are typically higher than SBA loans, but qualification may be faster and the loan can close in 2–4 weeks instead of 60–90 days.

How is the monthly payment on a business loan calculated?

Your monthly payment is calculated using the standard amortization formula M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of payments (years × 12). Origination fees (if any) are deducted upfront from your loan proceeds, so you receive less than the full loan amount but repay the full amount plus interest.

What credit score do I need for a business loan?

Most business term loans require a personal credit score of 680+ for the owner, with 700+ unlocking the best rates. Business credit scores (Paydex, Experian Intelliscore Plus) also matter, especially for established businesses. Lenders look at both personal and business credit, plus your time in business (typically 2+ years), annual revenue (usually $100k+), and cash flow. Startups and newer businesses may need to use personal credit or secure an SBA loan with a personal guarantee.

What is an origination fee?

An origination fee is a one-time charge deducted from your loan proceeds before funds are disbursed. Typical business loan origination fees range from 1% to 5%. For example, a $100,000 loan with a 2% origination fee means you receive $98,000 but repay $100,000 plus interest. Some lenders (especially online) charge no origination fee but compensate with a higher interest rate. Compare the total cost of borrowing (interest + fee), not just the rate or fee alone.

What is the difference between a business loan and an SBA loan?

A business term loan is a conventional loan made directly by a bank, credit union, or online lender — the lender takes on 100% of the risk. An SBA loan is a government-backed loan where the Small Business Administration guarantees a portion (typically 75%–85%) of the loan, reducing the lender's risk. SBA loans offer lower rates (7%–10% vs. 8%–15% for conventional) and longer terms (up to 10 years), but have stricter qualification and longer processing times (60–90 days).

How long does it take to get a business loan?

Online lenders (OnDeck, Bluevine, Funding Circle) can fund in 1–7 days. Banks and credit unions typically take 2–6 weeks. SBA loans take 60–90 days on average. The variance reflects the depth of underwriting: online lenders use algorithms and accept higher rates for speed; banks do more documentation review; SBA loans require SBA approval in addition to lender review. Plan ahead: apply for SBA loans 3 months before you need funds; online lenders are appropriate for time-sensitive needs.

Can I pay off a business loan early?

Most business loans allow early payoff, but prepayment penalties are more common than with personal loans. Typical prepayment penalties: 1%–3% of the remaining balance, or 6 months of interest. SBA loans cap prepayment penalties at 5% in year 1, 3% in year 2, 1% in year 3, and 0% thereafter. Check your loan agreement for the prepayment clause. Even with a small penalty, paying off early often saves more in interest than the penalty costs.

What documents do I need for a business loan application?

Typical documents: 2–3 years of business tax returns, year-to-date profit & loss statement, balance sheet, business bank statements (3–6 months), articles of incorporation or operating agreement, business license, owner personal financial statement, personal tax returns, and a business plan (for SBA or large loans). Online lenders have lighter requirements — often just bank statements and a government-issued ID. SBA loans require the most documentation.

Should I get a business loan or a business line of credit?

Choose a term loan for one-time, large purchases (equipment, expansion, hiring) where you need a fixed amount upfront. Choose a line of credit for ongoing working capital, inventory turnover, or managing cash flow gaps where you only pay interest on what you draw. Term loans have lower rates but rigid monthly payments. Lines of credit have variable rates and flexible draw/repayment but typically higher rates (12%–25%). Many businesses use both: a term loan for major investments and a line of credit for short-term needs.

Business Loan Calculator

A business loan calculator is a free online tool that estimates your term loan monthly payment and total cost, including origination fees. It shows the full amortization schedule to help you compare loan options. Free, no sign-up required.

Business Loan Details

Loan Amount?The total amount you want to borrow.

Interest Rate?The annual interest rate on your mortgage loan.

Loan Term?The length of your mortgage in years. Common terms are 15 or 30 years.

Origination Fee

End of inputs

Your Business Loan Summary

Monthly Payment

$2,051.65

5 years

Total Interest

$23,099.00

Over 60 months

Total Cost

$23,099.00

Interest + fee

Total Paid

$123,099.00

Principal + interest

Origination Fee

$0.00

0.00% of loan

Net Proceeds

$100,000.00

Cash you receive

Loan amount: $100,000.00. Origination fee: $0.00 (0.00%). Net cash: $100,000.00. Total loan cost: $23,099.00 (interest + fee).

Principal vs. Interest vs. Fee Breakdown

Total Cost of Borrowing

Amortization Schedule

Month	Principal	Interest	Balance

60 months · Showing 0 rows

Key Insights

Your $100,000.00 loan is in the typical range for SBA 7(a) loans ($50k–$350k). SBA loans have a 3% guarantee fee (financed into the loan) but offer longer terms (up to 10 years) and lower rates than conventional term loans. Use the SBA Loan Calculator to compare SBA vs. conventional pricing.

Your 5-year term is standard for a business term loan — balances monthly affordability against interest cost. Total interest of $23,099.00 over the term is typical for this size loan at current market rates. SBA 7(a) loans go up to 10 years, conventional loans typically cap at 5–7 years.

Your rate of 8.50% is in the typical range for a business term loan in 2026. SBA 7(a) loans are usually 7%–10%, conventional bank loans 8%–12%, and online lenders 10%–25%. Improving business credit (Paydex score) and providing collateral can lower your rate.

Your total interest of $23,099.00 is a moderate share of the loan amount — typical for a business term loan. Total cost of borrowing (interest + fee) is $23,099.00. Use the amortization table to see how extra payments could reduce interest.

No origination fee — you receive the full $100,000.00 loan amount. This is favorable; verify the rate itself is competitive. Some lenders (especially online) charge higher rates to compensate for no upfront fees.

Guide

How to Use This Calculator

1Enter the loan amount you need to borrow. Most business term loans range from $25,000 to $500,000; SBA loans cover up to $5M.
2Set the interest rate. Bank loans typically charge 8%–12%, online lenders 10%–25%, and SBA 7%–10%. Your rate depends on credit, time in business, and revenue.
3Choose the loan term. Conventional loans typically run 1–7 years; SBA loans allow up to 10 years. Shorter terms mean higher monthly payments but lower total interest.
4Set the origination fee. Typical fees range from 0% (some online lenders) to 5% (SBA alternative). The fee is deducted from your proceeds upfront.
5Review the monthly payment, total interest, and total cost of borrowing (interest + fee).
6Compare the principal, interest, and fee components in the breakdown pie chart to see how each contributes to your total cost.
7Examine the amortization schedule to see how each payment splits between principal and interest over the loan term.
8Use the AI insights to identify opportunities to reduce your total cost, compare with SBA options, or choose a different term.

Formula

How It's Calculated

The monthly payment for a business term loan uses the standard amortization formula:

M = P × [r(1+r)^n] / [(1+r)^n − 1]

Where:
- M = monthly payment (principal + interest)
- P = loan amount
- r = monthly interest rate (annual rate ÷ 12)
- n = total number of payments (years × 12)

Origination fee is deducted upfront:
  fee = loanAmount × originationFeeRate
  netProceeds = loanAmount − fee

Total cost of borrowing = total interest + origination fee

For example, a $100,000 loan at 8.5% over 5 years with 2% origination fee:
- Origination fee = $2,000
- Net proceeds = $98,000
- r = 0.085 / 12 = 0.0070833
- n = 60
- M = $2,057.84/mo
- Total paid = $123,470.40
- Total interest = $23,470.40
- Total cost = $25,470.40 (interest + fee)

Note: This is a conventional business term loan. For SBA 7(a) loans
where the 3% guarantee fee is FINANCED into the loan (not deducted
upfront), use the SBA Loan Calculator instead.

Glossary

Key Terms

FAQ

Frequently Asked Questions

Scenario Calculators

$100K Business Loan Calculator — 10-Year Term

Calculate the monthly payment on a $100,000 business loan with a 10-year term. Compare SBA, term loan, and line of credit options.

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