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Term Loan Calculator: What Can You Afford?

Plug in the numbers to see how much your term loan will cost.

How Much Will Your Term Loan Cost?

Term loans are the business loans that most people know well. When you think of a “loan,” a term loan is probably the type of loan that pops into your head first.

And whether you’re getting a longer-term loan from a bank or a medium-term loan from an online lender, 9 times out of 10 a term loan is probably your most affordable financing option.

Just how affordable can a term loan be? Use our term loan calculator to plug in the numbers.

Copy and paste this link to embed our term loan calculator on your website!

Are Term Loans Your Lowest-Cost Financing Options?

Longer-term loans from a bank or medium-term loans from online lenders are a small business owner's best financing option available.

See if you can qualify for low rates and long terms with the industry's top lenders.

Check Your Options

How Do Term Loans Work?

Term loans are the most common type of business loan out there, so you probably already understand the structure pretty well.

You borrow a lump sum all at once, typically for a specific purchase or project, then repay it at a fixed interest rate over time.

The loan amount, term length, interest rate, and repayment schedule can all vary depending on your business financials and the lender you’re working with.

Term loans are extremely predictable, making them easy to plan for. You’ll know the amount of money, the interest rate, the payback period, and the payment schedule before taking out your loan—it will all be in your loan agreement and easily calculated with a term loan calculator.

Read more about term loans

For Your Term Loan Calculator: Terms, Amounts, and Rates

Term loans come in all shapes and sizes, and what you qualify for depends on your small business’s needs, credit, revenue, cash flow, and other financials.

Term loans can range from 1 year to 5 years, with daily, weekly, and monthly payments. Medium-term loans most often have monthly payments. Short-term loans, on the other hand, are more likely to have daily or weekly payments.

Loan amounts and interest rates also change with your business’s history and needs.

Medium-term loan amounts can range from $25,000 to $1 million.

And in general, they’re affordable financing options: interest rates tend to range from 6.50% to 30%.

What Will a Term Loan Cost? Here’s an Example to Plug Into Your Term Loan Calculator

Let’s take a look at term loan’s cost structure in action with an example.

Say you’ve qualified for a term loan of $30,000. You look into your term loan offer, and find that you’ve been quoted for a 12% interest rate and a 5 year term.

Plugging those numbers into your term loan calculator, what will the cost structure look like?

Well, given the monthly repayment schedule, you’ll have to make monthly payments of about $667. (This cost doesn’t take into account any fees you might have to pay up front when you first take out your term loan.)

With a term loan, it’s all about predictability—you’ll have that fixed expense every month until you’ve fully paid off the loan.

Which Term Loan Lenders Should You Work With?

The term loan is a broad financing category, available from traditional banks and alternative lenders alike.

If you can qualify from a term loan from a bank, that loan offer will almost always be your most affordable financing option.

However, most business owners have a hard time qualifying for traditional bank loans. In the case that you don’t score a bank loan, alternative lenders offering medium-term loans are your next-best options.

These lenders offer similarly long-term loans (think 1 to 5 years), large amounts, and low interest rates. But because they’ll be slightly easier—but by no means easy—to qualify for, and can fund loans in a shorter time frame, they’ll offer loans with higher interest rates than banks.

If an online, medium-term loan is right for your business, check out some of the best alternative lenders on the market:

The Top Term Loan Lenders to Work With:

How Does This Term Loan Calculator Work?

Got your term loan offer that’s right for you?

You’ll want to make sure that you can afford that loan before you sign on the dotted line.

You can use a term loan calculator to help you make an informed decision on whether or not your average monthly or daily cash flow exceeds what you’d have to make in loan payments every day, week, or month.

But if you’ve never used a business loan calculator before, you might not know which numbers to plug in where.

Here’s the general gist of how this term loan calculator works:

  • To find the APR of your loan and the amount you’ll make in payments, enter the loan amount found in your loan offer.

  • Next, find the term of the loan, along with the repayment frequency (weekly or monthly), and plug those numbers into your term loan calculator. (If you’re given a 2-year term loan with monthly repayments, you’d make 24 monthly payments in total. If you were offered a 2-year term loan with weekly repayments, you’d make 104 weekly payments in total.)

  • After that, plug in the interest rate you were quoted on your term loan, along with any fees that come with borrowing.

The term loan calculator will spit out your total repayment, monthly or weekly repayment, and your APR!

What Kind of Fees Could Come With a Term Loan?

One of the main purposes of a term loan calculator is to see what your APR will be if a lender only quotes you an interest rate or factor rate.

When it comes to evaluating the affordability of a loan, it’s APR that matters.

You might think that interest rates and APR are just about the same thing—they both account for the general cost of your loan.

With small business financing (and other credit products) that’s really not the case.

An interest rate shows the amount—expressed in a percentage of the loan’s principal—that a lender charges the borrower for the use of the assets. An interest rate is only the cost associated with borrowing money. It doesn’t include the other costs associated with taking on a loan.

That’s right—many business loans come with different fees a borrower must pay when they take on a loan. When you just look at a loan’s interest rate, you won’t see those fees incorporated into the percentage.

To understand the true cost to taking on that term loan, you need to look at APR. APR includes not only your interest cost of the loan, but the fees you incur by working with that lender.

When it comes to term loans, here are some fees to look out for:

Origination Fees

Many term loans (and other loan products, too) come with origination fees. Origination fees are typically around 1% to 5% of the loan’s principal, and are meant to cover the costs of administrative work it takes to fund a loan.

Application Fees

Some term loans also might come with application fees. An application fee could be a fixed amount or charged as a percentage of the principal. Typically, they’re meant to make up for any costs associated with processing an application—credit check fees, background check fees, etc.

Late Payment Fees

If you don’t send over your loan repayments in time, then some medium-term lenders could charge a late payment fee. These are usually fixed amount penalties charged every time you miss a payment. To avoid these fees, contact your lender to let them know you’re having a hard time covering loan payments. Many lenders will work with you to come up with a different repayment plan.

Pre-Payment Fees

On the other hand, you could be charged if you pay off your loan early. Often referred to as a pre-payment penalty, this fee is meant to ensure that lenders get all the money they’re owed in interest even if you can pay off early (allowing you to avoid interest payments).

Learn More About Term Loans:

Financing Guides
Where to Find the Best Term Loans for Your Business

This business loan guide will walk you through everything you need to know to apply to the best term loans.

Read more
Expert Advice
If You're Considering a Medium-Term Loan, Read This First

Is a medium-term loan really right for your business? Find out here.

Read more
Expert Advice
Term Loan Deep Dive: Short-Term vs. Traditional Term vs. SBA Loan

Let's cover all the term loans on the market—what's the best type of business loan for you?

Read more

Interested in Term Loans? Here are 3 Other Loan Products to Consider

Maybe you’ve used the term loan calculator and found that the numbers don’t make sense for your business. Or maybe you simply want to be informed when going through the small business loan search and know your full suite of options.

If either is the case, then here are a few other business loans to consider.

1. SBA Loans

Compared to term loans, SBA loans are similar in loan amounts, terms, and interest rates.

In fact, SBA loans really are just term loans—but a little different.

SBA loans are loans that are issued by SBA lenders (traditional banks and lending institutions), but guaranteed by the Small Business Administration.

The guarantee is meant to encourage banks to offer those desirable term loans to younger, less qualified small business owners. The guarantee gives them security that, in the case you default on your loan, they’ll get most of their money back.

SBA loans offer long-term financing (up to 25 years depending on the loan program), large amounts (up to $5 million), and low rates (generally a 6% to 8% APR).

Read more about SBA loans

2. Business Lines of Credit

Business lines of credit are structured quite differently than a term loan, but can still offer large amounts of financing over a long, flexible term.

A business line of credit is comparable to a credit card—you’re approved for a credit line that gives you access to a pool of funds. You can draw from your line of credit whenever you want or need to, only paying interest on what you draw. Once you’ve paid your lender back what you drew, your credit line gets refilled to its original amount.

Depending on the line of credit lender you’re working with, you could be approved for similarly large amounts of capital—up to $1 million. Terms on some of the more affordable lenders could also last up to 5 years.

A business line of credit is a great option for businesses that are looking for flexible financing.

Read more about business lines of credit

3. Short-Term Loans

As we mentioned before (and as you probably saw yourself after using a term loan calculator), term loans are one of the most affordable financing options.

Short-term loans, on the other hand, are structured similarly to term loans—but are much less affordable.

Short-term loans offer business owners a lump sum of capital that gets paid back with daily or weekly payments, over a much shorter-term (usually 3 to 18 months).

Because short-term lenders tend to work with less qualified borrowers and approve loans very quickly (often the same day you apply), interest rates will be higher on this financing product.

But if you need fast access to a relatively small amount of capital (and you can afford to pay it off quickly), a short-term loan could be the right business loan for you.

Read more about short-term loans

See What Other Loan Products Will Cost You

What kind of rates could you get with other business loans? Try these business loan calculators to find out.

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Last updated July 24, 2020