There is nothing like securing the right finance for any growing or starting business. It’s friendly entry funding with a low interest rate and longer repayment terms for many small business owners. But when do you know what your loan will actually cost, what your monthly payments will look like, or even if you qualify? In comes the SBA Loan Calculator.
In this post, we’ll break down the importance of an SBA Loan Calculator, how it works,
and exactly why it is a must-have tool for every entrepreneur interested in securing funding through the Small Business Administration.
What Is an SBA Loan Calculator?
An SBA loan calculator is actually an online tool used to estimate how much you need in order to calculate your monthly payments and the general total cost for SBA loans.
It calculates by considering the loan amount, the interest rate,
and the loan term so you will have an idea of what your repayment schedule will resemble. Just don’t expect the exact number-it’s close enough but it helps you prepare the finances.
This calculator can be of great benefit to loan seekers, especially those under popular SBA loan programs, like the popular SBA 7(a) loan, used mostly to secure work capital, purchase equipment, and even real estate.
Why Use an SBA Loan Calculator?
Financial Clarity
- With any loan you are taking up, knowing your commitment is worthwhile. An SBA Loan Calculator helps you understand how much you will pay monthly, which again gives you a better basis for deciding whether an SBA loan is suitable for your business. Knowing your monthly obligations will help you make better plans and ensure that your cash flow covers loan payments.
For instance, suppose that you have a startup that you are raising $100,000 of capital for. With the SBA Loan Calculator, you will be able to estimate on what monthly payments you will owe, say $1,000 or $2,500, depending upon the terms and conditions of your loan. That’s quite a difference in your monthly planning!
Understand Interest Rates
- You see, interest rates on SBA loans are generally lower than those of comparable standard loans but vary as well. You can play with the calculator and get a feel for just how much the monthly payments can change with only slight changes in interest rates.
Preparation for Loan Application
- You should have an idea beforehand of what you are looking for when applying for an SBA loan. The calculator ensures that you expect all the concerns the lender may have going forward. Besides this, you’ll know how much you can reasonably borrow.
How Does the SBA Loan Calculator Work?
Input Loan Amount
- Enter the amount you wish to borrow. So if you wish to borrow $50,000 in an SBA 7(a) loan, that is where this would go.
Interest Rate
- Next enter the estimate of the interest rate. SBA loans are known to have lower interest rates, even as low as 5% to 10%, and even 12% on some loan programs, all depending on the program you are eligible for.
Loan Term
- The term for an SBA loan can either be short or long, which varies from 5 to 25 years. This shall be determined by you as an individual based on the needs of your business. The longer the term is, the lower the monthly payments will be but more in total interest over the lifetime of the loan.
Monthly Payment and Total Cost
Once you have all the information in the SBA Loan Calculator, it calculates your estimated monthly payment and then gives the total cost of the loan, which means how much you will pay in principal and interest combined.
Example Calculation Using the SBA Loan Calculator
- Suppose you want to borrow $75,000 under an SBA loan with a 7 percent interest rate and a term of 10 years. Based on the information provided by the SBA Loan Calculator, you will find out that an approximate monthly payment for your loan would be around $871.14. You will pay interest over the full term of the loan at about $30,536, so the total cost for the loan would be around $105,536.
It’s with this estimate that you’ll have a vivid picture of the long-term commitment you’re about to make. Adjusting the loan amount or term will change these figures, making you more in control of your financing options.
What Types of SBA Loans Can You Calculate
1. Sba 7a loan calculator
The SBA 7(a) Loan is the most widely used loan program and can be applied to any use, be it a purchase of real estate or helping to bridge the working capital gaps. It has very flexible terms and thus remains the option for many small business owners.
2. Sba 504 loan calculator
The SBA 504 Loan is actually for any business that wants to invest in fixed assets, which might include real estate or any machinery. This loan usually carries a lower down payment but can be more limited by specificity when applied.
3. SBA Microloan Program
When the request is for a smaller amount of funding, it may be well-suited for the SBA Microloan Program. It offers loans as large as $50,000 and is most often available to a start-up or small business that does not require much money.
SBA Loans Advantages
SBA loans have more advantages over the other business loans since they are preferably taken up by most entrepreneurs due to the following advantages:
1. Relatively Low Interest
SBA loans are normally associated with relatively low interest rates, which make them cheaper in the long run.
2. Longer Repayment Periods
Some loans even allow the owners of small businesses repayment periods up to 25 years to keep their finances better in control.
3. Facilitates Easy Qualification for Small Businesses
SBA loans can also make qualification easier for firms that are not exactly short of a few blemishes in their credit history, as compared to the case of a regular loan.
Expert Insights on SBA Loans
According to John Smith, the expert in small business financing, “The primary advantage of SBA loans lies in the fact that they open doors to affordable financing for small businesses that may struggle otherwise to obtain traditional loans. The proper application of tools like an SBA Loan Calculator makes it easier for business owners to understand what they are signing up for and, therefore, manages their cash flow better.
The National Small Business Association conducted a study and learned that lenders provided much-needed clarity on loan terms, which assisted the business in making astute financial decisions in choosing an SBA loan; 75% agreed.
SBA Loans Are Always the Best Option?
While SBA loans do come with a large number of benefits, they are by no means meant for everyone.
In fact, one major drawback is that the process of applying can be lengthy and time-consuming-it takes weeks sometimes even months. Therefore, companies with urgent funding needs may find that SBA loans are too slow.
Still, with all these disadvantages, SBA loans appear to be one of the most cost-effective options available for numerous small businesses which come easy to access.
Use the SBA Loan Calculator to Plan Your Financial Future
An SBA Loan Calculator is one of the tools a small business owner should look at before applying for an SBA loan, which helps estimate monthly payments, the cost of the loan in total, and, of course, interest.
This kind of calculator enables you to make smart decisions and adjust financing to meet the long-term goals of your business.
From SBA 7(a) to the 504 or Microloan program, the calculator clears up the pathway to getting that funding your business needs to succeed.
But if you are ready to make the jump in business, then start with the SBA Loan Calculator to get a view on which financing opportunities make the most sense for you.