How it works
A commercial term loan funds a specific business need — equipment, inventory, working capital — and the enterprise repays it through scheduled installments charged to the operating account. This tool projects the monthly debt service and the all-in cost of capital after lender fees, which on a commercial facility can run 1–4% of the principal and are frequently financed into the balance rather than paid out-of-pocket at closing.
Underwriters for business credit look primarily at the company's cash flow, not the owner's personal salary. The key benchmark is the debt-service coverage ratio (DSCR): most banks want operating income to exceed the new loan payment plus any existing obligations by at least 1.25×. A manufacturer seeking a $75,000 machinery loan will be evaluated on whether the press or lathe being purchased generates enough gross margin to service the debt through the 60-month term.
| Facility Type | Typical Lender | Common Term | Collateral |
|---|---|---|---|
| SBA 7(a) | SBA-preferred lender | 5–25 years | Business assets |
| Equipment financing | Bank or captive finance co. | 3–7 years | The equipment itself |
| Working capital line | Online alt-lender | 6–24 months | UCC-1 lien on receivables |
The formula
M = P × [r(1 + r)^n] / [(1 + r)^n − 1]
P is the funded principal, r is the periodic rate (annual ÷ 12), and n is the term in months. The fee is computed separately as a percentage of the starting principal and added to the total cost of capital — it does not change the amortization schedule itself unless the lender rolls it into the balance (which this tool does not assume).
Worked example
A small manufacturer is financing a $75,000 CNC press with a 5-year SBA-style facility at 8.4% APR and a 2% origination charge. The shop needs to know whether the equipment's contribution to revenue will clear the monthly debt service.
r = 0.084 ÷ 12 = 0.007
M = 75,000 × [0.007(1 + 0.007)^60] / [(1 + 0.007)^60 − 1]
M = 75,000 × 0.020383 ≈ $1,528.72
Origination fee: $75,000 × 0.02 = $1,500
Total paid over 60 months: $1,528.72 × 60 = $91,723.20
All-in cost of capital: $91,723.20 + $1,500 = $93,223.20
So the enterprise pays roughly $93,223 over five years to borrow $75,000 — meaning the press needs to generate at least $1,529 of monthly gross margin to break even on the debt service alone, before the DSCR cushion the bank requires.
Things to watch
SBA-style facilities often carry a guarantee fee (currently up to 3.5% on the guaranteed portion) that is separate from the lender's own origination charge. If your quote includes both, add the percentages together before entering the fee field so the all-in figure captures everything. Also confirm whether the rate is fixed or variable — SBA 7(a) variable rates track the prime rate and will shift each time the Fed moves, so the payment shown here is only valid until the next adjustment.
This calculator produces an estimate for planning purposes, not a commitment. Final pricing, fees, and eligibility depend on your business credit profile, industry, and lender-specific policies.