How a business term loan payment is calculated
Most bank, SBA and online term loans are amortizing: you repay the same amount each period, and each payment covers that period's interest first, then some of the principal. That's why your first payments barely dent the balance, while the last ones are almost all principal. The calculator uses the standard formula: payment = P × r ÷ (1 − (1 + r)−n), with r the interest rate per payment period and n the number of payments.
Why the APR is higher than the interest rate
The interest rate is what the lender charges on the balance. The APR also counts fees charged when the loan is made, such as origination charges[1]. If a lender takes a 3% origination fee from a $50,000 loan, you receive $48,500 but repay payments calculated on $50,000, so the true yearly cost is higher than the 10% headline rate. The calculator finds that rate: the APR at which your payments exactly repay the cash you received. The federal Truth in Lending Act requires APR disclosure on consumer loans[1]; business loans aren't always quoted with an APR, so work it out yourself before you compare offers. Two loans at the same rate can cost very different amounts once fees are in.
Worked examples
| Loan | Payment | Total interest | Fees | Total cost | APR |
|---|---|---|---|---|---|
| $50,000, 10%, 5 years, monthly, 3% fee | $1,062.35 | $13,741 | $1,500 | $15,241 | 11.32% |
| $100,000, 9.5%, 10 years, monthly, 2% fee | $1,293.98 | $55,277 | $2,000 | $57,277 | 9.98% |
| $25,000, 18%, 1 year, weekly, 3% fee | $526.17 | $2,361 | $750 | $3,111 | 24.21% |
| $250,000, 11%, 10 years, monthly, no fee | $3,443.75 | $163,250 | $0 | $163,250 | 11.00% |
Look at the weekly example. A 3% fee on a one-year loan adds about 6 points to the APR, because the fee is spread over only a year of payments. On the 10-year example, a 2% fee adds about half a point. Same kind of fee, very different bite, so short online loans deserve a careful look.
SBA 7(a) loan limits to compare against
For SBA 7(a) loans, the rate is negotiated with the lender but can't exceed SBA maximums. For variable-rate loans, the maximum is the base rate plus 6.5% for $50,000 or less, plus 6.0% for $50,001 to $250,000, plus 4.5% for $250,001 to $350,000, and plus 3.0% above $350,000. Terms are usually 10 years or less (up to 25 years for real estate). Loans of 15 years or more carry a prepayment fee of 5%, 3% or 1% if you prepay 25% or more of the balance in the first three years[2].
Need flexible access to cash rather than a lump sum? Compare costs in our business line of credit guide. Related tools: Break-Even Calculator to check the loan pays for itself, and Employee Cost Calculator if the loan funds a hire.
Frequently asked questions
How do I calculate a business loan payment?
Use payment = P × r ÷ (1 − (1 + r)^−n), where P is the amount borrowed, r the interest rate per payment period (annual rate ÷ 12 for monthly) and n the number of payments. A $50,000 loan at 10% over 5 years costs $1,062.35 a month.
What's the difference between the interest rate and the APR?
The interest rate is the cost of borrowing the money. The APR adds fees charged when the loan is made, such as origination fees, so it's the better number for comparing offers.
How much does a 3% origination fee add to the APR?
It depends on the term. On a $50,000, 5-year loan at 10%, a 3% fee deducted from the loan raises the APR to about 11.32%. On a one-year loan the same fee adds roughly 6 points, because there's less time to spread it over.
What are SBA 7(a) maximum interest rates?
For variable-rate 7(a) loans, SBA caps the rate at the base rate plus 6.5% for loans of $50,000 or less, plus 6.0% up to $250,000, plus 4.5% up to $350,000 and plus 3.0% above that. Fixed-rate maximums are published separately by SBA.
Does paying weekly instead of monthly save interest?
Slightly, at the same annual rate, because the balance falls sooner. But weekly payments are mostly found on short, higher-cost online loans, so compare the APR and total cost rather than the payment size.
Does this calculator work for merchant cash advances?
No. Merchant cash advances and many short-term products use a factor rate and daily or weekly remittances instead of interest on a declining balance. Convert the offer to a total cost and an APR before comparing it with a term loan.
Sources
APR explanation from the CFPB; SBA program limits from SBA.gov. We haven't tested these figures with a lender, insurer or payroll provider; rules and rates change, so confirm with the official source. See our methodology and editorial policy. General information only, not financial, tax or legal advice.
- [1] CFPB: difference between a loan interest rate and the APR: https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/ (checked 17 Oct 2026)
- [2] SBA 7(a) terms, conditions and eligibility (maximum rates, maturities, prepayment fees): https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility (checked 17 Oct 2026)