Estimate monthly payments, total interest, and the true cost of any small business loan. Compare SBA loans, term loans, and lines of credit with a full amortization schedule.
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Every growing business eventually needs capital — whether it is to buy equipment, hire staff, cover a seasonal gap, or seize a time-sensitive opportunity. But borrowing for business is fundamentally different from personal debt. Done right, a business loan is an investment that generates returns far exceeding the cost. Done wrong, it becomes a burden that drains cash flow and limits growth. This guide walks you through everything you need to know — types, costs, qualification, and real scenarios — so you borrow smart.
Most business term loans use amortization — the same system as mortgages. Each monthly payment covers part interest and part principal. Early payments are mostly interest; later payments are mostly principal.
On a $100,000 loan at 8% APR over 5 years (60 months), the monthly payment is $2,028. Over the full term, you pay $121,660 total — $21,660 in interest. That interest is the cost of having the money now instead of later. And for most businesses, it is tax-deductible.
| Loan Type | Typical Rate | Amount Range | Term | Best For |
|---|---|---|---|---|
| SBA 7(a) | 5-10% | Up to $5M | 5-25 years | Established businesses, real estate, large purchases |
| Bank Term Loan | 6-13% | $25K-$500K | 1-10 years | Businesses with strong credit and financials |
| Online Term Loan | 7-30% | $5K-$500K | 3 mo-5 yrs | Fast funding, newer businesses |
| Line of Credit | 7-25% | $10K-$250K | Revolving | Cash flow gaps, seasonal needs |
| Equipment Financing | 5-15% | Up to $5M | 2-7 years | Machinery, vehicles, technology |
| Invoice Factoring | 1-5%/mo | Up to 90% of AR | Per invoice | Businesses with slow-paying clients |
Scenario 1: Sarah’s Bakery Equipment. Sarah needs $45,000 for a commercial oven and refrigeration for her expanding bakery. She qualifies for an SBA microloan at 6.5% over 5 years. Monthly payment: $882. Total interest: $7,920. The equipment generates an additional $3,000/month in revenue. Payback on the loan cost: under 3 months. This is a textbook “good debt” scenario — the asset generates more than it costs. Use our Break-Even Calculator to model when a purchase pays for itself.
Scenario 2: Marcus’s Construction Company. Marcus needs $200,000 to buy two excavators. He gets equipment financing at 8% over 7 years with 10% down ($20,000). Financed amount: $180,000. Monthly payment: $2,806. Total interest: $55,700. The excavators generate $15,000/month in billable work. Even accounting for fuel, maintenance, and the loan payment, he nets $8,000/month in additional profit. The loan pays for itself in year one.
Scenario 3: Keisha’s Marketing Agency. Keisha needs a $50,000 line of credit to cover cash flow gaps between client payments. She draws $30,000 in March, repays $15,000 in April when invoices clear, draws $20,000 in May. Her line charges 12% APR but she only pays interest on what she uses. Average monthly interest: roughly $250. Without the line, she would miss payroll or turn down clients. The flexibility is worth far more than the cost.
Scenario 4: David’s Restaurant Expansion. David wants to open a second location. Total cost: $350,000. He gets an SBA 7(a) loan at 7% over 10 years with $50,000 down. Financed: $300,000. Monthly payment: $3,484. Total interest: $118,000. His first location generates $12,000/month in profit. If the second location performs similarly, the loan payment is comfortably covered. He uses our Profit Margin Calculator to project whether the expansion maintains his margins.
💡 Key insight: The question is never “can I afford the payment?” It is “will this loan generate more money than it costs?” If a $100,000 loan at 8% ($21,660 in interest) funds equipment that generates $50,000/year in new revenue, the return on that borrowed capital is 130%. That is a no-brainer. If the loan funds something that does not generate revenue — think carefully.
Before applying, understand the five factors lenders evaluate:
The interest rate is not the full story. Watch for these additional costs that inflate the true price of borrowing:
Always calculate the total cost including all fees using our calculator’s Advanced Mode. Then compare that total across different loan offers. The lowest monthly payment is not always the cheapest loan. Use our Loan & Mortgage Calculator for a more detailed amortization comparison.
| SBA 7(a) loans | 5-10% |
| Bank term loans | 6-13% |
| Online lenders | 7-30% |
| Equipment financing | 5-15% |
| Lines of credit | 7-25% |