Frequently asked questions
What is effective APR and why is it higher than the stated rate?
Effective APR accounts for the origination fee. You receive less money (loan minus fee) but pay interest on the full amount. A 9% loan with a 2% fee effectively costs more because you're paying 9% on money you never received. The effective APR reflects the true cost.
Are business loan rates fixed or variable?
Both exist. Term loans are typically fixed; lines of credit are often variable (tied to prime rate). This calculator assumes a fixed rate. For variable rates, it shows your current cost — re-run if the rate adjusts.
What origination fee is typical?
1–6% for business loans, depending on the lender and risk profile. SBA loans typically charge 0–3.5%. Online lenders may charge 2–6%. Always compare the effective APR (not just the stated rate) across offers.
Should I choose a shorter or longer term?
Shorter terms have higher monthly payments but lower total cost. Match the term to the asset's life — equipment loans should not outlast the equipment. If cash flow is tight, a longer term keeps payments manageable, but you pay significantly more in total.
How does this differ from an SBA loan?
SBA loans (like 7(a) or 504) are government-backed, offering lower rates and longer terms than conventional business loans, but have more paperwork and a slower approval process. Enter the SBA terms into this calculator to see the payment.