Business Loan Calculator

Reading the Rate Basis

On a reducing-balance loan, interest applies to the amount still owing. Annual flat interest uses the opening financed amount throughout the term. Select the basis stated in the offer before entering its rate.

At 10% over five years, a $200,000 loan with no fees or balloon costs $4,249.41 a month on a reducing balance. The same figures at an annual flat rate cost $5,000 a month. Flat interest totals $100,000 because it charges $20,000 for each of the five years.

A factor of 1.2 means total contractual repayments are 1.2 times the amount it applies to, before any separately charged fees. It does not mean 1.2% annual interest. Factor-based offers need their actual payment schedule to compare their cost with an annual rate.

Weekly and Monthly Repayments

The calculator rebuilds the loan schedule for 12 monthly, 26 fortnightly or 52 weekly payments a year. Reducing-balance interest uses the annual rate divided by that frequency, with payments at the end of each period. Moneysmart's loan calculator assumptions use the same periodic compounding convention.

Switching to weekly payments calculates a new payment rather than dividing the monthly amount by four. A month averages more than four weeks. The annual cash-payment result shows the regular outflow across the full year, with any balloon added to the final scheduled payment.

Enter the recurring fee for the frequency you select. A $25 monthly fee is $300 a year, equivalent to about $5.77 each week for this model. An offer with daily interest, irregular payment dates or seasonal repayments needs its own contractual schedule.

Fees and the Total Cost

Financed fees increase the opening loan balance and attract interest. Cash-paid fees increase total cash paid without increasing the loan balance. Recurring fees increase each payment and the total financing cost.

The starting example gives the business $200,000 and adds $1,500 of financed fees. At 10% reducing-balance interest over five years, the monthly loan payment is $4,281.28. A $25 monthly fee takes the regular outflow to $4,306.28.

Including the $500 cash-paid fee, total cash paid is $258,877 and total financing cost is $58,877. Financing cost is all payments and cash-paid fees less the original $200,000. It includes the financed fee once and the interest charged on it.

Turn on the second offer to compare different rates and fees for the same cash amount, term, frequency and balloon. Both offers use the selected interest basis. A positive saving means the second offer costs less across the full term.

Short-Term and Long-Term Business Loans

A longer term usually lowers each repayment while increasing the interest paid on a reducing-balance loan. Compare the full-term cost alongside the payment the business can sustain. A balloon lowers regular payments by leaving principal for the end.

These examples use 10% reducing-balance interest, monthly payments and no fees or balloon. The calculator accepts six-month steps up to 30 years to model an available offer. Entering a 30-year term does not establish that an unsecured business loan or another product is available for that duration.

Working Back to an Interest Rate

Enter a known loan repayment to solve the equivalent reducing-balance annual interest rate for the financed balance, term and balloon. Exclude recurring fees from that repayment. The calculator leaves the entered offer rate unchanged, so you can compare the two figures.

For the starting $201,500 financed balance, a $4,281.28 monthly loan payment over five years implies approximately 10% annual interest. That is a nominal rate compounded monthly. Cash-paid fees and recurring fees remain in the total-cost calculation, so the solved rate is not a fee-inclusive comparison rate.

The solver accepts annual rates from 0% to 100%. A repayment below the zero-interest amount cannot repay the financed balance and balloon under these assumptions. Impossible combinations clear the results and show a message beside the known-repayment field.

Cash Available for Debt Service

Cash-flow capacity starts with sustainable annual cash available before principal and interest payments. Use cash after operating costs, tax and necessary reinvestment. Business turnover alone cannot tell you how much remains for debt payments.

Agree the cash measure with the accountant and reconcile it to the financial statements. Account for working-capital movements, necessary capital spending and owner drawings that must continue. Add back a one-off cost only when the evidence supports treating it as non-recurring.

Enter existing debt payments separately because the calculator subtracts them after applying the coverage target. Include commitments that remain after the new loan. Business.gov.au's business loan application guide explains the role of financial statements, cash flow and evidence of repayment ability.

From Coverage Target to Loan Amount

Divide annual cash available by your debt-service coverage target, then subtract existing annual debt payments. That leaves the annual budget for the new loan. Divide it by the payment frequency and deduct the recurring fee before converting the repayment budget to principal.

For example, $120,000 of annual cash divided by 1.25 allows $96,000 for all debt payments. Subtract $24,000 of existing payments to leave $72,000 a year, or $6,000 a month. After the $25 monthly fee, $5,975 remains for the loan itself.

At 10% over five years, that supports about $281,216 financed, or $279,716 available to the business after $1,500 of financed fees. Cash-paid fees need separate funds. Capacity mode uses a fully repaid loan with no balloon.

The coverage target expresses how much cash you retain relative to debt payments. A 1.25 target means $1.25 of cash for each $1 of total debt service. It is an editable scenario target, not a minimum that every lender uses.

A Lower-Income Scenario

Reducing annual cash by 20% lowers the cash available to support the new loan before any change in interest rate or term. In the capacity example, cash falls from $120,000 to $96,000. The new loan's annual repayment budget falls from $72,000 to $52,800.

The lower-cash scenario keeps the same existing payments, fees, rate and coverage target. Separate chart rows increase the interest rate by 2 percentage points or the coverage target by 0.25. The rate scenario has a 100% ceiling. Each row changes one assumption, so the chart shows which constraint reduces borrowing capacity.

A farm business with seasonal receipts also needs a period-by-period cash forecast. An annual surplus can coexist with a payment shortfall before harvest or customer collection. Business Queensland's business funding guide explains why early-stage cash flow can be insufficient for regular debt repayments.

Why Lender Limits Differ

Lenders assess the business's financial position, repayment history and security alongside the requested amount. Their financial adjustments and credit policies determine the offer available. This calculator shows the effect of assumptions you enter.

A small business, startup or unsecured borrower can use the repayment mode to assess an actual offer. Capacity mode needs an evidenced cash-flow measure, which a new business may have to forecast. A personal loan used for business purposes still needs terms permitting that use.

Match the proposed payment dates to the business's cash forecast and keep a funding plan for any balloon. Before accepting an offer, compare its security, guarantees and early-repayment terms alongside the payment and total financing cost.