Enter the loan amount in dollars.
Enter the interest rate as a percentage.
Enter the loan term in years.
Enter the down payment amount in dollars.
History:

Explanation

How to calculate the cost of an SBA loan?

The cost of an SBA loan can be determined using the following formula to calculate the monthly payment and total payment:

Monthly Payment (M) formula:

§§ M = \frac{P \times r}{1 - (1 + r)^{-n}} §§

where:

  • § M § — monthly payment
  • § P § — principal amount (loan amount minus down payment)
  • § r § — monthly interest rate (annual interest rate divided by 12)
  • § n § — total number of payments (loan term in months)

Example:

  • Loan Amount (§ P §): $10,000
  • Interest Rate: 5% (0.05 annual)
  • Loan Term: 10 years (120 months)
  • Down Payment: $2,000

  1. Calculate the principal:

    • § P = 10,000 - 2,000 = 8,000 §

  2. Calculate the monthly interest rate:

    • § r = \frac{0.05}{12} = 0.004167 §

  3. Calculate the total number of payments:

    • § n = 10 \times 12 = 120 §

  4. Calculate the monthly payment:

    • §§ M = \frac{8000 \times 0.004167}{1 - (1 + 0.004167)^{-120}} \approx 84.50 §§

Total Payment (T) formula:

§§ T = M \times n §§

where:

  • § T § — total payment over the life of the loan
  • § M § — monthly payment
  • § n § — total number of payments

Example:

Using the monthly payment calculated above:

  • Total Payment:
    • §§ T = 84.50 \times 120 \approx 10,140 §§

When to use the Cost per SBA Loan Calculator?

  1. Loan Planning: Determine the monthly and total payments for different loan amounts, interest rates, and terms.

    • Example: Assessing how much you can afford to borrow based on your budget.

  2. Financial Analysis: Evaluate the impact of different down payments on your monthly payments.

    • Example: Comparing scenarios with varying down payments to see how it affects your cash flow.

  3. Budgeting: Help in planning your monthly expenses by understanding your loan obligations.

    • Example: Incorporating loan payments into your monthly budget to ensure you can meet your financial commitments.

  4. Investment Decisions: Analyze the cost of borrowing against potential returns from investments.

    • Example: Deciding whether to take out a loan for a business investment based on projected returns.

  5. Loan Comparison: Compare different loan offers based on their costs.

    • Example: Evaluating multiple SBA loan options to find the most cost-effective solution.

Practical examples

  • Small Business Owner: A small business owner might use this calculator to determine the monthly payment for an SBA loan to finance equipment or expansion.
  • Homebuyer: A prospective homebuyer could use the calculator to understand the costs associated with an SBA-backed mortgage.
  • Financial Advisor: Financial advisors can use this tool to help clients make informed decisions about taking out loans for business or personal use.

Definitions of Terms Used in the Calculator

  • Loan Amount: The total amount of money borrowed from a lender.
  • Interest Rate: The percentage charged on the loan amount, typically expressed as an annual rate.
  • Loan Term: The duration over which the loan must be repaid, usually expressed in years.
  • Down Payment: The initial amount paid upfront when taking out a loan, which reduces the total amount borrowed.
  • Principal: The remaining balance of the loan after the down payment has been made.

Use the calculator above to input different values and see the monthly and total payment change dynamically. The results will help you make informed decisions based on your financial situation.