Compare business borrowing costs and usable cash
A business loan has two prices: the interest you pay over time and the fees that arrive on day one. This calculator keeps them apart, then puts them back together. It shows the payment, the cash you actually receive after fees, the total cost of credit, a fee-adjusted borrowing rate and whether your operating cash flow covers the debt payments. A loan of 10,000 that pays out 8,750 costs more than its quoted rate suggests, and the calculator shows by how much.
The comparison that matters is between offers, not between a rate and a fee. A loan at 8% with no fees and a loan at 6% with a 4% origination fee are not as far apart as the quoted rates suggest: the second has a modeled rate of 7.71% on the cash you actually receive, so the two-point gap between the quotes shrinks to 0.29 points once the fee is counted. Enter each offer's rate, payments and fees on the same terms, then compare cash received, interest plus fees and the modeled rate side by side. The lowest quoted rate is not always the cheapest loan.
Financed, deducted and upfront fees
Each fee, an origination percentage, a documentation fee and other fees, can be handled in one of three ways. A deducted fee is taken out of the loan proceeds, so you borrow the full amount but receive less. A cash fee is paid at closing from your own money, which has the same effect on your net cash. A financed fee is added to the loan, so you receive the full amount and repay the fee with interest. The origination percentage is applied to the loan amount you enter, never to the fees themselves.
Take 10,000 at 10% nominal, monthly payments over 60 months, a 5% origination fee and a 750 documentation fee, 1,250 in total. If both are deducted, you receive 8,750.00 and the payment is 212.47. If both are financed, you receive the full 10,000, the loan grows to 11,250.00 and the payment rises to 239.03. Financing feels easier today and costs more in total interest: 3,091.76 against 2,748.23. The calculator rejects a case where fees leave no usable cash.
Check what each fee is called in your term sheet. An origination fee is usually a percentage; a documentation or closing fee is usually a fixed amount; other fees might include a broker commission, which you can enter in the other-fees line. A prepayment charge is not modeled separately. If a fee is optional, run the loan with and without it. If the lender takes fees out of the loan proceeds, choose deducted; if you pay them from your own account at closing, choose cash; if the lender adds them to what you owe, choose financed.
Payment formula, compounding and balloon timing
Inputs and units
Enter a nominal annual rate, how often it compounds, how often you pay and how many payments there are. The calculator converts to a rate per payment period, i = (1 + j ÷ c)^(c ÷ m) - 1, where j is the annual rate, c is the compounding frequency and m is payments per year, or e^(j ÷ m) - 1 for continuous compounding. A level payment on a financed principal F over N payments is F × i ÷ (1 - (1 + i)^(-N)), or F ÷ N at 0%. Without fees, 10,000 at 6% monthly over 12 payments gives 860.66.
Timing and assumptions
Payments are at the end of each period. Daily, weekly, twice-monthly and every-two-weeks schedules use equal synthetic periods, with no business-day calendar, so a real lender's schedule can differ slightly. Factor rates, variable rates and lender approval are outside the model.
Boundary cases
Two other repayment types are available. Interest only pays the interest each period and the principal with the last payment; the same example costs 83.33 a period and 5,000.00 in total interest. A single payment at maturity accrues interest each period and settles everything at the end: 10,000 at 6% monthly compounding over 12 months becomes 10,616.78. A balloon is residual principal due with the last payment. At 0% with a 4,000 balloon on 10,000 over 12 payments, the regular payment is 500.00 and the last payment is 4,500.00.
Debt service coverage and maturity cash needs
Debt service coverage compares cash available with the payments the loan requires. You enter the annual cash available for debt service, meaning operating cash flow before any debt payments and after the operating costs you choose to deduct, and any existing annual debt payments. The ratio is cash available divided by total debt service. With 120,000 of cash flow and 100,000 of existing debt service, coverage is 1.20. If debt service is zero the ratio is not applicable, not infinite.
The balloon or final principal is shown separately instead of being hidden inside the regular ratio. In the 0% example with a 4,000 balloon and 12,000 of annual cash, regular payments of 6,000.00 a year are covered 2.00 times, but the final year needs 10,000.00 and coverage falls to 1.20. A ratio above 1.00 describes your chosen cash measure; it is not a lender's decision and no approval threshold is implied. To check the cash you generate, check operating break-even, and to judge whether a project earns back its cost, compare project payback with borrowing costs.
Coverage depends on what you put in the numerator. Use cash available for debt service, not profit after interest: operating cash flow before any debt payments and after operating costs, taxes you must pay and any owner draw you need to take. Use a cautious figure rather than your best month. If your cash flow is seasonal, run the calculator with the weak season's annualized figure as well, and check the final-year ratio separately when a balloon is due, since the final-year debt service includes the whole residual principal.
Worked loan example and limits of modeled APR
Enter these inputs
Choose regular payments, 10,000, 10%, monthly compounding and payments, 60 payments, a 5% origination fee and a 750 documentation fee, both deducted.
Read the output
The payment is 212.47, interest is 2,748.23 and fees are 1,250.00, so interest plus fees is 3,998.23. Because you receive 8,750.00, the modeled borrowing rate is 15.93% nominal a year, against 10.00% with no fees. The rate is the yield that equates the cash you receive with the payments. It is a modeled figure, not a statutory APR, because disclosures follow their own rules.
Change one assumption
Change the fees to financed and the rate falls while the payment rises. For a plain loan without fees, compare a standard loan payment. Change one input at a time; the result hides after each edit.
Compare the modeled rate of 15.93% with what the borrowed money will earn. If the project you are funding returns less than that after its own costs, borrowing destroys value even when the payment fits comfortably inside your cash flow.
Business loan questions
Is the interest rate the same as APR?
No. A fee-adjusted modeled yield can exceed the contractual interest rate, and statutory disclosures can use different rules.
Can I enter a factor rate as an interest rate?
No. Factor rates are a different quoting basis and are outside this fixed-interest engine.
How do financed fees affect the loan?
They increase the amortizing balance while not increasing the cash you can use.
Does a DSCR above one mean approval?
No. It describes the selected cash flow ratio, not a lender's underwriting decision.
What happens with a balloon payment?
Regular payments exclude the residual principal; the final obligation and maturity coverage include it once.