What is a Business Loan Calculator?

Business loans are often the quickest way for business owners to get additional capital for essential business operations. And unlike other types of funding, it doesn’t require them to give up a stake in the business in exchange.

As the name implies, business and commercial loans are only granted to qualified businesses and are meant to be used purely for business purposes.

Business owners take out business loans for lots of different reasons. But the most common ones are:

• Funding growth and expansion plans
• Purchasing new equipment/additional inventory
• Hiring more employees
• Dealing with immediate cash flow problems

A Business Loan Calculator helps business owners easily figure out the ideal loan terms and repayment plans that will best suit their current and future financial situation. Loan repayments will negatively affect a business’s cash flow so it’s important to carefully scrutinize all the details of a loan to make sure you can actually afford it and that it puts you in a good position for long-term success.

Business Loan Calculators can provide additional details about a loan such as:

• A breakdown of principal and interest payments
• Actual APR (Annual Percentage Rate)
• Total loan fees
• Total interest cost
• Total cost of the loan

A Business Loan Payment Calculator can quickly estimate how different loan terms and interest rates can affect how much your monthly payments will be. This allows you to easily compare loans from different providers so you can pick out the best deals possible.

Banks, financial institutions, and lending companies might also feature a Business Loan Calculator on their website that gives business owners an estimate of how much they can borrow based on some basic financial information such as:

• Historical annual revenue
• Monthly bank statements/deposits
• Credit score
• How long the business has been operating
• Business and personal assets

How are Business Loan Payments Calculated?

Calculating how much a monthly loan payment really only requires some high school math. But you’ll definitely need to use a calculator and you’ll have to go through multiple steps before you arrive at the final number.

Here’s what the monthly payment or amortization formula looks like:

Where:

• P = Principal Loan Amount
• i = Periodic Interest Rate (Annual Interest Rate ÷ 12)
• n = Total Number of Payments (Length of the Loan in Years x 12)

The actual calculation is going to take you at least a couple of minutes to complete and is prone to error if you’re doing it manually even with the help of a calculator.

With a Business Loan Repayment Calculator, you’ll not only be able to see the actual monthly payments in just a few clicks, but it can also show a complete loan amortization schedule.

If you look closely at an amortization schedule or table, the monthly payments are a fixed value for the duration of the loan — at least for most loan types. However, the portion that goes to interest and principal payments changes after every payment period.

Interest payments are calculated by multiplying the interest rate by the outstanding loan balance.

As the principal is paid off after every payment period and the outstanding balance decreases, the interest payments also become lower.

The portion of the monthly payment that goes to principal payments increases over time while interest payments decrease. In other words, these two values have an inverse relationship throughout the loan’s duration.

A loan repayment or amortisation calculator can also show the beginning and ending balance of the loan after every payment period. This is helpful if you’re planning on paying off the loan much earlier to save on total interest costs by making extra principal payments periodically. It lets you strategically plan out how much and how often you should make extra payments instead of just doing it randomly.

How Important are Business Loan Calculators?

One of the primary benefits of adding a Business Loan Calculator to your website is that it helps you attract more high-quality leads and clients. Even a simple Business Loan Calculator can drive more traffic to your site from both new and experienced business owners who are looking for different loan options.

Another major benefit is that it helps eliminate a lot of the back and forth that you and potential clients might typically go through just to answer basic questions about different loan products, how much they can borrow, interest rates, and monthly payments.

And it isn’t just lenders and financial institutions that can benefit from business loan calculators. Business consultants and professional services firms can also boost their traffic and conversions, among many other important metrics, with the help of a loan calculator widget.

Small businesses and early-stage startups often have trouble securing business loans because they don’t have the historical data or experience to prove that they are capable of paying off the loan. In such cases, they’ll usually be required to show personal income from other sources and put up their personal assets as collateral.

With ConvertCalculator’s calculator builder, you can easily create a Small Business Loan Calculator or a Startup Business Loan Calculator if you want to attract this particular segment of the market. Aside from driving more traffic to your site, and educating your visitors about their loan options and what they’ll need to show to qualify for a loan, a specially designed loan calculator that caters to their specific needs will help you establish your brand and stand out from the competition.

Depending on your line of business or area of expertise, you can create different business loan calculators for all sorts of traditional and alternative loan options such as:

• SBA loans
• Personal business loans
• Secured and unsecured business loans
• Short-term loans
• Micro-loans or Peer-to-Peer financing
• Government grants

If you don’t want to build a new calculator from scratch just yet, our pre-made calculator templates provide you with a great starting point and can give you a quick introduction to what our calculator editor is capable of. They’re all easily customisable and you can get one up and running in less than an hour.

You can even add a calculator to your website today completely free of charge with no strings attached. You’ll only have to pay our monthly fee once your calculator exceeds 100 monthly visits. Our pricing model is very flexible and you don’t have to pay for services and features that you don’t need.