Getting a business loan is usually considered a risky move. Many entrepreneurs try to avoid this way of getting funds to finance their business endeavors because they are afraid they won’t be able to pay off their debts.
Besides, most business owners are intimidated with so many figures, financial terms, and get worried about the transparency of all the borrowing process.
But, what if there is a way to eliminate all these doubts and questions?
What if there was a reliable and transparent way to determine if you could afford to get a business loan and whether this investment would pay off?
Fortunately, there is. With the help of a business loan calculator, it’s easier to decide whether you should obtain a business loan in the first place and how much you’ll end up paying for it.
Get familiar with business loan calculator terms
Before you learn how the business loan calculator works and check if you can afford to borrow money, it’s important to get familiar with some business loan calculator terms that may come in handy.
- Loan amount: the requested amount of money you plan to borrow.
- Payment term: the payment frequency at which you repay a determined amount of the loan over a certain period of time. It can be daily, weekly, or monthly.
- Interest rates: the cost of borrowing cash from lender expressed in a percentage of the principal loan amount. It usually differs from lender to lender.
- Total interest paid: the total interest paid throughout the term of the loan.
- Funding fee: the cost for sending you the funds via ACH or direct deposit.
- Closing fee: also called closing costs, this fee includes certain expenses the lender incurred regarding to your loan.
- Documentation fee: the cost for filing the documentation and preparing the agreements regarding to your loan.
- Cost of the loan: the sum of the total interest paid, closing fee, funding fee and documentation fee.
And those are the basics. Now you are ready to use a business loan calculator and estimate if a loan is a smart move for your business.
How a business loan calculator works
A business loan calculator is a tool that’s super easy-to-use.
It’s very intuitive, and, more importantly, you can do everything by yourself. You don’t have to be a finance expert or to hire one.
You can do it from the comfort of your own home and change the terms as many times as you need untill you find the loan that works for you.
All you need to do is to:
- Enter the necessary loan amount figure.
- Select the payment term.
- Choose the interest rate
Once you entered all the information, click Calculate.
When you calculate your monthly payment, make sure that this number isn’t higher than 80% of your monthly income net profit. For instance, if your income is $1,000 per month credit payments, you can manage a loan with a monthly payment of $800.
Likewise, have in mind that the cost of the loan does not exceed the total return expected after the investment.
It’s time to calculate your success
The business loan calculator is a handy and simple tool that can help you determine the real cost of borrowing the working capital and check whether you will be able to make monthly payments comfortably.
With it, you can eliminate all the risks that usually come with a loan, and more importantly, you can make a real difference in your business and take it to the next level.
Make sure you use a business loan calculator to make smart business decisions and ensure the growth of your company.
So, what will you use your loan for?