Business Loan Calculator
Model business borrowing with fees, compensating balances and the true cost of capital.
Inputs
SBA 7(a) guaranty fee: 0–3.5% of guaranteed portion. 0 for conventional loans.
Required deposit (% of loan) you cannot use. Raises effective cost of capital.
Recurring fees charged each year (e.g. SBA annual service fee, bank fees).
Monthly Payment
$1,879.90
True Cost of Capital (APR)
9.80%
All-in rate on net usable proceeds after fees and compensating balance.
Net Usable Proceeds
$146,625
Total Interest Paid
$75,588
Total Fees Paid
$8,375
Total Cost of Borrowing
$83,963
All interest plus all fees over the life of the loan.
Upfront Guaranty Fee
$3,375
Compensating Balance Required
$0
Step by step
Scheduled monthly payment
PMT($150,000.00, 0.7292%, 120)
= $1,879.90
Upfront guaranty/origination fee
$150,000.00 × 2.25%
= $3,375.00
Compensating balance (locked up)
$150,000.00 × 0%
= $0.00
Net usable proceeds
$150,000.00 − $3,375.00 − $0.00
= $146,625.00
The capital your business can actually deploy.
True cost of capital (all-in rate on net proceeds)
= 9.80%
1.05% above stated rate.
Total cost of borrowing (interest + all fees)
= $83,963.15
How it works
A business loan's stated APR understates the actual burden when upfront guaranty fees, compensating balance requirements and annual service fees are included. The 'true cost of capital' here is the rate that would produce the same total monthly outlay if the business had received the full net usable proceeds — making different loan structures directly comparable.
Formulas
Scheduled payment
Payment = Principal × monthly_rate / (1 − (1+r)^−n)
- P
- Full loan amount
- r
- Monthly rate
- n
- Months
True cost of capital
Solve for rate where PMT(net proceeds, r, n) = monthly payment + monthly fees
- F_up
- Upfront fee
- CB
- Compensating balance
- F_mo
- Monthly service fee
Frequently Asked Questions
What is a compensating balance and why does it matter?
Some bank lenders require you to keep a deposit (often 10–15% of the loan) at their institution as a condition of the loan. You're effectively borrowing $100,000 but only deploying $85,000, while paying interest on $100,000. This raises the effective cost of capital materially.
What is the SBA guaranty fee?
The SBA charges a guaranty fee on the government-guaranteed portion of a 7(a) loan. For loans over $150,000 with terms over 1 year, it's currently 2.5–3.5% of the guaranteed amount (typically 75–85% of the loan). It's usually financed into the loan, but that increases interest.
How do I compare SBA vs. conventional business loans?
Use this calculator's 'true cost of capital' for both. SBA loans often have lower stated rates but carry guaranty fees; conventional loans may have higher rates but no guaranty fee. The true cost of capital after all fees is the correct comparison metric.