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Loan Amount: --
Establishment Fee: --
Total Interest Paid: --
|YEAR||REMAINING BALANCE||MONTHLY REPAYMENT||INTEREST PAID||ENDING BALANCE|
To use the business loan calculator, you’ll need to enter some details about your loan. These are explained below:
Once you have filled in your business loan details, simply click ‘See My Repayments’ to view an estimated repayment amount. You can then select Monthly, Fortnightly, or Weekly repayments to see what your repayment amount will be at various frequencies.
The business loan calculator uses amortisation calculation to determine your repayment amounts. Amortisation provides a more accurate representation of repayments as it is used to assess the amount of interest you will pay over a set period.
A business loan is generally offered for a fixed rate over a fixed term. A fixed rate is an interest rate that remains constant for the term of your loan, as opposed to a variable interest rate, which may change due to various economic influences.
Your business loan repayments will need to cover both the interest and principal amount of your loan. When you first make repayments on your business loan, a larger portion of the repayment amount will be used to cover the interest over the principal. This is because your repayments will be based on the total amount of money still loaned to you by the lender.
When expressed a mathematical formula, the repayment calculation can seem somewhat complex. However, once you understand how interest is calculated on a loan amount over time, you may even be able to perform the calculations yourself.
The simple formula for calculating Loan Repayments is: Loan Amount / Discount Factor
Where many people struggle with these calculations is in finding the discount factor, which is calculated by dividing the interest rate of your loan by the number of payments per year (12 for monthly, 26 for fortnightly, or 52 for weekly) to first obtain the Periodic Interest Rate.
The formula is expressed as: (((1 + i) ^n) - 1) / (i (1 + i)^n)
To show how this complex formula can be easily understood, we’ve presented a simple example below.
|Business loan amount||Repayments (5% interest)||Repayments (7.5% interest)||Repayments (10% interest)|
In the example below, we’ll use a $30,000 loan with a fixed 9% interest rate, repaid monthly over 3 years:
If you want to quickly calculate your repayments without creating your own spreadsheet with the above calculations, you can use our free business loan calculator.
Calculated your Business Loan Repayments and need to make other types of finance calculations? We have a range of financial calculators for almost any situation. You can use these to calculate your pay, estimate equipment finance repayments, calculate capital gains tax (CGT), and much more.