Business Loan Calculator

The Three Loan Types You Will Be Offered

Business lenders fall into three categories: online lenders, banks, and the SBA. Online lenders approve in hours and fund in 1 to 3 days, but charge 15% to 25% APR. Banks take 2 to 6 weeks and charge 8% to 12% APR for strong borrowers. SBA 7(a) loans take 30 to 90 days and charge a variable rate based on the Prime rate. The SBA caps the spread over Prime at 3.0% to 6.5% depending on loan size ([13 CFR 120.214](https://www.ecfr.gov/current/title-13/section-120.214)).

The spread between the cheapest and most expensive option on a $100,000 loan over 5 years is roughly $25,000 in total interest. Speed always costs money. Matching the loan type to the use case matters more than finding the lowest advertised rate.

Origination Fees and Why Effective APR Matters

Most business loans charge an origination fee of 1% to 3% of the loan amount, deducted from the proceeds at closing. On a $100,000 loan with a 3% fee, you receive $97,000 but repay interest on the full $100,000. The effective APR — the rate that accounts for this — is meaningfully higher than the nominal rate.

On a $100,000 loan at 10% nominal APR over 5 years with a 3% origination fee, the effective APR is closer to 11.5%. The calculator computes this automatically. If a lender quotes an attractive nominal rate but charges a 4% or 5% origination fee, the effective APR may exceed a competitor's nominally higher rate with no fee. Always compare effective APR, not headline rate.

Factor Rate vs APR: The Conversion Nobody Explains

Many online lenders quote factor rates instead of APR. A factor rate of 1.30 means the borrower repays $130,000 on a $100,000 loan, regardless of how long the loan runs. On a 12-month term, that 1.30 factor translates to roughly a 50% effective APR. On a 6-month term, it translates to roughly 65% APR. The shorter the term, the higher the implied APR.

To convert a factor rate to APR on a short-term loan, multiply the factor by 12 divided by the number of months, then subtract 1, then multiply by 100. For a 1.30 factor over 12 months: (1.30 × 1) − 1 = 0.30, times 100 = 30% simple rate, which approximates 50% APR once compounding is accounted for. Factor rates should always be converted before comparing offers.

What Qualifies You for a Business Loan

Time in business matters more than most founders expect. Under 12 months, options are limited to revenue-based financing and merchant cash advances. 1 to 2 years opens online term loans and some bank products. Over 2 years, full bank and SBA eligibility begins ([SBA 7(a) eligibility](https://www.sba.gov/funding-programs/loans/7a-loans)). Annual revenue of $100,000 or more is the floor for most online lenders, and $250,000+ opens bank term loans.

Personal credit score is the second gate. Above 680 opens bank and SBA pricing. 640 to 680 sits in online lender territory. Below 640 narrows to higher-rate products. A personal guarantee is required by nearly all lenders for loans under $1 million, and it applies regardless of business structure (LLC, S-Corp, or sole proprietor).

SBA 7(a) vs Bank Term Loan: The Trade-off

SBA 7(a) offers the longest terms (up to 25 years for real estate, 10 for working capital) and the lowest rates, but the process is slow. Documentation includes 3 years of tax returns, personal financial statements, business debt schedule, and collateral analysis. The SBA guarantee fee adds 0.5% to 3.5% depending on loan size.

Bank term loans are faster (2-6 weeks), require less documentation, and can be structured with flexible draws. Rates are typically 1 to 2 points higher than SBA but the process cost is lower. For loans under $150,000, bank term loans are usually the better fit because the SBA documentation burden is not worth it. Above $250,000 with real estate or equipment as collateral, the SBA advantage grows.

What Kills a Business Loan Application

Three red flags end most applications early: recent tax liens, unresolved business debt in collections, and negative cash flow on the last 3 to 6 months of bank statements. Lenders underwrite the business as it is now, not as it was 2 years ago. Strong 2023 financials will not offset a losing 2026.

A fourth is geographic or industry concentration. Lenders avoid cannabis (federal illegality), adult entertainment, gambling, and firearms. Restaurants and retail are higher-risk industries and get tighter terms. B2B services, healthcare, and professional services get the best pricing.