#business loans calculator
SBA Loan Calculator
For many businesses, a loan backed by the U.S. Small Business Administration (SBA) is the least expensive way to get capital. However, y ou will generally have to meet the these 4 requirements:
- In business at least 2 years Personal credit score is 660+ Seeking at least $30,000 At least $100,000 in revenues for the past 12 months
If you are qualified for SBA loans, use our SBA Loan Calculator to estimate your interest rate and monthly payments:
What is the SBA Loan Calculator?
This SBA Loan Calculator is specifically designed for SBA 7A loans. the SBA’s most popular loan program. The SBA itself does not make the loan. Rather, it partially guarantees loans issued by banks and other lenders. The government guarantee enables small businesses to receive these loans at lower interest rates and for longer periods of time than they would otherwise be able to obtain. Some lenders also require less down payment and collateral for SBA 7A loans.
Our calculator lets you input your loan term, the loan amount you’re seeking, and your annual business income. You can then view the interest rate, monthly payment for an SBA 7(a) loan, and your Debt Service Coverage Ratio, which a financial ratio used by lenders in determining whether to approve you for a loan.
Please do not use this calculator for calculating interest rate or payments on 504 / CDC loans or other SBA loan products.
How Are the Interest Rate and Monthly Loan Payment Determined?
The SBA sets the maximum the maximum interest rates that lenders can charge on 7A loans. The maximum interest rates are determined by the length of the loan term (number of years) and the size of the loan amount being borrowed.
Based on the loan amount and loan term, our calculator figures out and displays the maximum interest rate. Note that your interest rate may be lower than what’s displayed the number that’s shown is the maximum rate that would be permissible. In general, interest rates are lower for larger loan amounts and shorter time periods.
Keep in mind that interest rate is different from the Annual Percentage Rate (APR) of the loan. Depending on what you are purchasing with the loan proceeds, additional costs such as an SBA guarantee fee, referral packaging fee, and closing costs may come into play that increase the APR. There is no guarantee fee on SBA 7A loans under $150K. For most loans over $150K, the guarantee fee starts at 3 percent of the SBA-guaranteed portion of the loan and increases incrementally based on the size of the loan.
In order to estimate the monthly payment, the calculator assumes the loan will be fully paid off in equal monthly payments throughout the life of the loan.
The interest rate and monthly loan payments on an SBA loan may, over time, change based on market conditions. Interest rates on most SBA 7A loans are variable, which means they change with market interest rates (most SBA 7A loans are pegged to the Fed s Prime Rate ). If market rates rise, the interest rate and payments on the loan will rise. This is usually a small increase over the course of several years.
What is the Debt Service Coverage Ratio?
The Debt Service Coverage Ratio (DSCR) is a financial ratio used by SBA lenders to determine if you can afford a loan. It’s calculated by dividing your business’ annual net operating income by your annual loan payments. Generally, SBA lenders prefer borrowers with a DSCR over 1.25.
For example, suppose your annual business income is $100,000, and you want to take out a 10-year $500,000 SBA loan. Your loan payments for one year will be approximately $66,612 (the loan calculator shows a monthly payment of $5,551 simply multiply this by 12 to estimate the annual payment). Dividing $100,000 by this number gives you a DSCR of 1.5. This is considered good and will help you get approved for SBA financing.
Will I Qualify for An SBA 7(A) Loan?
In order to qualify for an SBA 7(a) loan, you typically need to be in business for at least 2 years, have a revenue-generating business, and have a personal credit score above 650.
Most SBA loans are issued to existing businesses, but in certain circumstances, those who want to start or buy a new business may also be able to qualify for an SBA loan. In this case, you should, in addition to a credit score above 650, have a 20-30 % down payment and business management or industry-relevant experience.
You can find out in minutes whether you qualify by applying with SmartBiz .
Get The SBA Loan Calculator For Your Site
David Waring is the Co-Founder of Marc Waring Ventures LLC, the parent company FitSmallBusiness.com. Prior to Co-Founding Marc Waring Ventures he held a variety of senior level positions at successful startups ranging from mobile technology to institutional trading systems.