SBA Loan Calculator: Payments & Amortization

Cody Cromwell
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How to Read Your SBA Loan Calculator Results

Many small businesses do not have access to outside funding, which is a primary source of start up capital for new businesses. The Small Business Administration (SBA) is one of the primary sources of capital available to new businesses.

Your business can get an SBA loan if you are:

  • A small business owner
  • A sole proprietor
  • The business is being established by a minority or woman owned business
  • An existing small business borrower within 3 years of the date of the loan

Apart from loans arranged through a bank or credit union, one of the easiest ways to obtain origination capital is through the SBA.

When you apply for an SBA loan, you will need to fill out a credit application. The SBA will then look at how your business is doing and how they’d like to see their investment results over the life of the loan. If you qualify, the SBA will provide you with the funds to finance your business. The SBA will also monitor your business’s performance on an ongoing basis and has the ability to repossess the business if they see it’s not doing well.

How the SBA Loan Payment Calculator Works

The SBA Loan Payment Calculator compares monthly payments on a specific-sized SBA loan with that of a comparable FHA loan, with interest rates set at various levels. The loan percentage used in the comparison is based on the sba loan program for which the loan is being compared.

As part of the loan application, the borrower may give us a loan percentage to use in the comparison. If we need to account for differences in program fee and/or loan interest rates then that may be a factor in the comparison.

These figures are based on an assumption that we'll approve the loan for the specified size. As part of the loan underwriting process we may determine that the kind of loan will require fees or discounts or be of a different size (as example, we may decide to reduce the size of a bridge loan as compared to an acquisition loan). If the loan amount is reduced, the fees and/or interest rates may also be reduced.

The loan percentage may change based on the total loan amount and transaction type. For example, the loan percentage for a commercial loan may be different than that of a second lien loan. We may negotiate with a borrower to reduce the loan percentage to a percent range that is better suited to the loan type or for a given transaction. Loan amounts may change due to transaction-specific factors such as interest rates, origination fees and/or closing costs.

Small Business Loan Payment Calculator Inputs

Payment Schedule:

  • APR
  • Term (years)
  • Loan size
  • Interest rate
  • Beginning principal balance
  • Number of payments

APR: Annual Percentage Rate, a fee charged by banks on business loans based on an interest rate. Here’s a good explanation from Advantages Finance on what APR is and how they use it.

Term: The length of your loan … from one day to 20 years!

Loan Size: The amount of money you want to borrow.

Interest Rate: The fee businesses pay banks to borrow money. Typically, the higher the interest rate, the longer it will take to pay back the loan and repay the principal.

Starting Principal Balance: The remainder of loan debt, which you will need to repay. It would typically be your principal and interest payments minus the down payment you’ve made.

Number of Payments: How many times you’ll make payments in the year. Most borrowers make monthly payments.

Payments should be made at regular intervals, usually between 30 days and 10 months. The actual number of payments and how often they should be made will depend on your loan.

Let’s use the above calculator as an example.

Small Business Loan Calculator Outputs

How much?

Remember these few things when using our SBA loan calculator:

  • The calculator demonstrates the general method for all types of loans. The methods, formulas, and inputs may differ based on the loan type and term.
  • Fannie Mae (and Freddie Mac) are government-sponsored enterprises (GSEs) and participants in the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC or FNMA/FHLMC).
  • There may be fees associated with the use of this calculator. These may include fees for the use of your computer and internet connection, fees to access the internet site on which the calculator is located and fees to perform certain functions such as view your personalized results and create graphs.
  • The opinions voiced in this calculator, statement, and any related documents are those of the calculators’ developer. While the methods, calculations and inputs may be used for most loans, they do not account for all factors involved in your particular loan transaction. You should consult your loan officer before making any final loan decisions.

What’s Not Included in the SBA Loan Payment Calculator

The SBA Loan Calculator is free, but is intended to be a “quick start” tool to help you learn how much money you’ll need to start your business.

It’s not intended to be an “all-in” tool for planning your business finances. For instance, it does not include every item you’ll need to start your business, such as a list of business goods or services you’re planning to offer, as well as how you’ll manage them.

It also does not include every aspect of your personal finances, such as rent, groceries, clothing, and other necessities.

Nonetheless, the calculator will help you get in the ballpark of how much money you’ll need to start your business, which is a first step to planning your financing.

If you’re a new or small business owner, you will eventually get your books in order and determine key financial items such as depreciation, inventory, payroll, and taxes. However, the purpose of the SBA Loan Calculator is just to help you determine how much money you’ll need to start.

SBA Loan Costs & Monthly Payment Factors

SBA loans are still preferred by many lenders – especially micro-loans – as they have a lower credit requirement and are often the only type of loan offered to many small businesses interested in purchasing a used business truck, forklift, construction equipment or other heavy equipment. The alternative option is to look to a private lender, but there’s no guarantee they’ll be willing to fund your business venture, as well as the expensive fees and down payments that can be involved.

Most lenders want to study the business plans and type of equipment you’re purchasing before they accept it as collateral on a SBA loan. The inspection process can take weeks, and if your business doesn’t pass inspection, you may still have a loan to repay even though your business is no longer buying the equipment.

Here are the factors that lenders will consider when calculating your SBA loan payment and total cost for a 150% SBA loan. To get a custom payment estimate for your business loan, simply complete the SBA Loan Payment Calculator above.

Loan Amount & Term

This section of the spreadsheet consists of your down payment, loan term, loan amount, and interest rate.

Typically, the down payment is taken out of your own pocket, while the bank will pay for the loan amount. If your loan is extended, you have the option of repaying the loan in monthly installments or with a lump sum payment. This payment will be added to your loan and totaled.

Lenders prefer monthly payments because they make it easier to spread out your payments and set up a schedule.

You can insert your own information for your down payment. When you insert your own amounts, you can make the payments an amount that you would like. You can also select the terms for the loan. The amount that you have inserted should be greater than the amount that you have chosen for the down payment.

To set up monthly payments, find Balance Sheet & Cash Flow in the drop-down list. There will be a row on the spreadsheet for monthly payments. Start the row with Loan Amount and use the first line to enter the amount of money you put down. To the right of that line, use the drop-down list for choice.

SBA Loan Interest Rates

Down Payments & Amortization.

All banks and credit unions have to abide by the Federal Truth in Lending Act. This law states that all mortgage lenders must display the annual percentage rate (APR), which is the cost of your mortgage. This is calculated by adding up all of the costs of the loan and the payoff amount. Because of this, you can use this information, plus the loan amount you wish to borrow, to calculate the rest of your monthly payment and the length of time you’ll be making payments.

Before you get too excited, take a closer look at the APR. It does not factor in fees associated with the loan nor does it take into account variable loans, such as adjustable rate mortgages. Also, each lender sets their own interest and minimum down payment requirements for the protection of your financial situation.

So how do you go about getting an appropriate APR for your loan?

Your lender uses their own fixed rates, which are set at various intervals based on the lender and the loan requested. When determining your APR, the lender simply multiplies the fixed rate with the number of years you’re going to be making payments. However, note that you’ll be paying both the fixed rate as well as the variable rate, making it more difficult to understand how long it’ll actually take you to pay off your loan.

SBA Loan Fees

Even though an SBA can process your loan in less than 48 hours, there are many potential gotchas that can come into play that aren’t mentioned in the SBA’s SBA Loan Process Guide for financing small businesses. This is why most small business owners never go through the SBA loan application process and instead put up their money to acquire their business assets.

But if you do decide to pursue the SBA loan application, you should definitely consider using an SBA loan calculator to help you decide whether you should accept the terms and conditions and proceed to the next steps and apply for an SBA loan.

Whenever there is more than one option to choose from, it is important to run an SBA loan calculator to know exactly what it entails.

Every SBA loan application comes with a contractual agreement that spells out the terms and conditions, including the percent of equity you are required to put up for the financing. Using an SBA loan calculator, you can plug in the price of the business asset and the amount of equity you’d like to provide and evaluate the various scenarios to determine if the contract is something you’d be willing to sign.

SBA Loan Rates

The SBA 7(a) Loan program is a no-downpayment loan program, meaning it allows borrowers to purchase business assets without first having to secure an SBA-guaranteed loan. Consequently, SBA 7(a) program loans have the following disadvantages:

Fixed Rate Loans

Unlike an SBA construction loan, which has a variable interest rate, SBA 7(a) fixed rate loans have a fixed rate. The rate is set by the US Public and Private Development Bonds at 4.25 percent for each loan term:

Term Rate

7-year loan 4.25%

10-year loan 4.125%

15-year loan 4.00%

20-year loan 3.875%

25-year loan 3.75%

30-year loan 3.625%

When an SBA 7(a) Loan is refinanced, the borrower must pay the higher of the two rates.

Limited Liability

Although SBA 7(a) loans don’t require collateral, they do require a business commitment. Borrowers must provide a substantial business commitment as reflected in an operating plan and an acceptable credit history. The business must also pay an application fee (check 7A03) of 1 percent of the loan amount.

Maximum SBA 7(a) Loan Rates

Maximum SBA 7(a) Loan Rates are required by lenders under standard SBA regulations. These are the rates that lenders use to calculate their SBA 7(a) loans.

Those rates are:

  • Prime Lending Rate (PMR)
  • Discount Rate (PR)
  • interest plus

Pros & Cons of SBA Loans

SBA loans provide small businesses with the rare opportunity to earn equity. A conventional loan gives you a certain sum of money but does not provide equity; an SBA loan, on the other hand, can help you acquire the equity in your business as well as provide cash to buy or complete necessary business assets, such as a furnace, or office equipment, or a new work truck.

It can be a difficult decision to make.T