Business Loan Repayment Calculator

How the business loan repayment calculator works

The fixed nominal annual rate is divided by 12. For positive monthly rate r and n periods, the regular payment is P × r × (1 + r)^n ÷ ((1 + r)^n − 1); at zero interest it is P ÷ n. Principal, deducted fee and the regular payment round half-up to cents. This monthly convention is explicit and is not a legal APR calculation.

Each month starts with the prior closing cent balance. Interest equals opening balance × monthly rate, rounded half-up to cents. Payment first covers that interest and the remainder reduces principal. A payment cannot exceed the amount then owed, and the final scheduled payment is adjusted to clear the remaining cent balance. Rounding can therefore make the final amount differ from the regular payment.

The fee reduces initial proceeds rather than increasing the financed balance. The schedule excludes prepayments, daily accrual, irregular dates, variable rates, late fees, taxes and lender-specific rules. Zero borrowing requires zero deducted fee. A positive loan whose regular payment rounds to zero is rejected; compare the actual agreement before using this as a commitment forecast.

Worked example

A principal of 1,000 at a nominal annual rate of 12% over two monthly periods has a regular payment of 507.51. Month 1 interest is 10.00 and closing principal is 502.49. Month 2 interest rounds to 5.02 and the final payment is 507.51. Repayments total 1,015.02. A deducted fee of 20 gives 980 cash proceeds and 35.02 total interest-plus-fee cost.

Sources and assumptions

The source material explains the underlying calculation or pricing structure. Entered prices, costs, schedules and scenario choices are your assumptions; this tool does not obtain supplier quotes or predict actual results.

• Microsoft: PMT constant-rate payment convention