Find the payback amount and the true cost of a business loan, including fees, with fixed payments, interest-only payments or a single payment at the end.
The interest rate tells you only part of the price of a business loan. Lenders usually add an origination fee, which is a percentage of the loan, a documentation fee, and sometimes other charges. These come out of the money you receive or are paid up front, but you still repay the whole amount. This calculator adds them up and then works out the real rate: the yearly rate at which your payments repay the cash you actually received. That figure, often called the APR, lets you compare loans fairly.
Most business loans use regular payments, which can be daily, weekly, monthly or less often, and each payment covers the interest due plus part of the principal. An interest-only loan has you pay just the interest each month and repay the whole principal at the end. A loan repaid in the end has no payments until maturity, when you pay the principal plus all the interest that has built up. Pick the option from the Pay Back list to compare them.
The payback amount is what you pay each period. Interest is the total finance charge before fees, and interest plus fees is the full cost of borrowing. The real rate is higher than the quoted rate whenever there are fees, and the shorter the loan, the bigger the gap, because the fees are spread over less time. The rate is shown on the compounding basis you chose, so choosing Annually gives an annual percentage yield.
The real rate is the yearly rate that makes your payments repay the cash you actually received after fees. It is also called the APR. It is higher than the quoted interest rate whenever the loan has fees.
An origination fee is a charge for processing the loan, quoted as a percentage of the amount borrowed. A documentation fee is a flat charge for preparing the loan paperwork. Both are counted in the real rate.
With an interest-only loan you pay just the interest on the full balance each month, so the payment stays low and the balance does not fall. The whole principal is due at the end of the term.
There are no payments during the loan. At maturity you pay the principal plus all the interest, which builds up with compounding. This is common with short-term commercial loans.
The compounding setting decides how often interest is added to the balance. More frequent compounding adds interest sooner, so the same stated rate costs slightly more and the payment is a little higher.
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