If you’re looking into financing options for your business, you should work out the costs and value of competing loans with a business loan calculator.
If you’re looking at starting a new business or financing operations or purchases in an existing one, chances are you might be considering a business loan. These types of loans are similar to personal loans except they are tailored for small or commercial business purposes and generally offer larger loan amounts. Taking out a business loan is a big commitment, so it’s important to understand the total costs of the loan when you are weighing up the benefits. To do this, you can use a business loan calculator.
Read on to find out how the calculator works and how you can use it to save money.
What is a business loan calculator?
A business loan calculator, also referred to as a personal loan calculator, can help you to understand how much a loan will cost you. This calculator helps you compare two loans against each other so you can find the better deal for your business.
How does the calculator work?
To work out how much your business loan will cost you, simply adjust the following fields to represent your intended loan:
- Loan term. How long you need to repay the loan. If the repayments are too high you can adjust this after your first calculation.
- Loan amount. This is the amount you intend to borrow. If the monthly repayments are too much then you can reduce this amount on the calculator to see how much you could save.
- Bank name. Put in the name of two lenders you're considering borrowing from to easily distinguish them.
- Fixed rate. The annual rate you're charged with the loan.
- Fixed period. How long this fixed rate stays fixed for.
- Ongoing rate. If your loan comes with a rate that comes into effect down the track (following an introductory period) this is where to enter it.
- Upfront fees. Add the establishment fee (if one is charged) here.
- Fees. If the loan comes with ongoing fees you'll need to add them here along with the frequency they're charged.
- Discharge fee. If you're charged a discharge fee for exiting your loan early you'll need to add it here.
How to use the calculator to save you money
The calculator doesn’t only show you how much your business loan will cost you; it can also show you how to reduce the amount you pay. Here are some ways to use the calculator to see if you can save money:
- 1. Reduce repayments. While this doesn’t save you money in the long run, by reducing your repayments you will be able to keep money in your business for longer. This can help cash flow and can save your business money, even if you end up paying more money on your loan.
- 2. Reduce your loan term. By decreasing the amount of time you borrow the loan amount for, you may increase your repayments but you could save a considerable amount.
- 3. Compare your loan options. The best way to save money on a loan is to compare your options and find the best deal. When you’re comparing you should take into account the upfront and ongoing fees of the loan as well as the interest rate.
- 4. Alter your repayments. If you have chosen a monthly repayment frequency, you may find that you can save money on interest by making repayments more frequently. If you find you need to adjust your repayments due to cash flow issues, you can use the calculator to see what making interest-only repayments will cost you.