Business Loan Calculator

How does this business loan calculator work?

This tool is designed to handle the simulation of a business loan plan consisting in a regular payment made on a monthly basis with or without additional fixed contribution as such to have a clear image of the advantages of paying early.

The data you should provide consist in the following:

• Loan amount is the money borrowed.

• Loan term is the number of years or months to repay.

• Annual interest rate is the yearly relative cost of the money.

• Extra monthly payment is an optional field where you can specify a fixed extra payment you can add to the standard one.

• Loan start date is an optional field, default settled to current month and year, that can help get a clear date when you will be debt free.

The results displayed are the following:

• In case the extra payment is specified the form returns an interesting table as detailed below:

• In case no extra payment is specified the tool returns the data available only for the standard business loan, meaning the values for fields A to E.

Why is recommended to make extra payments?

An example of a calculation made with this business loan calculator may better show you the difference between making additional payments versus paying as agreed within contract. Let's assume somebody borrows $100,000 for a start up, for 5 years at an interest rate of 5%, and wants to know what happens by adding a fixed regular contribution of $400. The results he can then compare will look like this:

By analyzing the given table, two conclusions rise that emphasize the importance of making this effort:

• First is that by making extra payments you can get significant savings in interest. In our case these totalize an amount of $3,445.48.
• Second is that by making additions you can be deft free sooner than by following your standard schedule. In our case you make your last payment with one year earlier, so that you pay your debt in 4 years, not in 5 as initialy expected.

Types of business loans

By taking account of the finance scope, this loan type can be taken in order to:

• Finance a start up business that requires funds in order to launch, grow or enter the market;
• Finance an existing business with the scope of developing it;
• Finance an existing mature business in order to save it from a possible temporary default or from a bankruptcy.

By taking account of the desired term to repay there are:

• Business loans for terms of up to 5 years. These are the most used ones, as many small and medium sized enterprises prefer to design their business plans in such a way to pay the sooner the better. Moreover it should be mentioned that this approach is even more viable as the amounts borrowed can vary from tenths of thousands to maximum hundreds of thousands of dollars.
• Business loans for terms greater than 5 years. This type is used in case of big companies, multinational or international companies that borrow significant higher amounts compared to small or medium sized entities, and establish a longer period to repay.

By taking account of eligibility and terms or conditions that creditors may impose there are offers that do not require restrictive criteria neither important warranties (this is usually applicable in case of small amounts of up to $10,000) and some that require different warranties either with the business assets or with other properties.

By taking into consideration the approach of the entities financing, there are creditors willing to finance for gaining a fraction of that business, and creditors who are interested only in the revenues from interest.

How to finance a business?

There are multiple sources an entrepreneur can analyze, some of them unconventional and innovative:

• The classical approach is to borrow money in certain conditions with or without warranties. 
• An unconventional method is to promote an online campaign on sites that bring together entrepreneurs and investors and ask other people to finance your business plan.
• Use 0% credit card even though may seem risky. It is recommended ONLY in case you expect to have the financial capacity to pay back your negative balance in a very short time period;
• Try to negotiate with your suppliers longer terms to pay your bills (for instance negotiate terms of 3 months), while trying to get your money from your clients the sooner the better.  This way you can get temporary resources from your cash flow, and you can use them to develop or grow your plan.
• You can make a viable business plan and try to a get a partial or integral grant.
• Negotiate with entities willing to sponsor start ups because there are some available to finance you at least partially or by insignificant costs.
• Participate in start ups contests.