Frequently Asked Questions
How much business loan can I afford?
Bankers use Debt Service Coverage Ratio (DSCR) = Net Operating Income / Total Debt Service. DSCR ≥ 1.25 minimum (1.5+ preferred). Example: $200K NOI / $130K debt service = 1.54 DSCR. Higher DSCR = lower interest rates and easier approval.
What's a typical small business loan rate?
2025 rates: SBA 7(a) 10-13%, traditional bank 7-10%, online lender 15-30%, merchant cash advance 50-150% APR (avoid). Equipment financing 8-15%. Asset-based 10-15%. Rate depends on credit, collateral, time in business, and loan amount.
Should I take an SBA loan?
Yes if: profitable, US business, need $50K-$5M, willing to provide personal guarantee. SBA loans have lower rates, longer terms (10-25 years), and lower down payments than conventional loans. Downside: lots of paperwork, 60-90 day approval. Worth it for amounts over $200K.
Should I use gross or net revenue to test affordability?
Use operating cash flow (revenue minus operating expenses), not gross revenue. Gross revenue with no expenses subtracted drastically overstates your real ability to pay. If your revenue is $100K/month but expenses run $80K, you only have $20K available for debt service.
What loan term should I choose?
Match the term to the useful life of the asset you are financing. Equipment with a 5-year life: a 3-5 year term. Leasehold improvements: 5-10 years. Working capital: 1-3 years. A longer term lowers the monthly payment but raises the total interest paid.
How does the projected growth rate affect the analysis?
The tool projects your coverage ratio at the end of the term using the growth rate you enter. If the loan only pencils out on future cash flow (not current), you are betting that growth will materialize. Use conservative projections and base the decision mainly on current cash flow.
What does the debt-service ratio as a percent of revenue mean?
It is the share of your monthly revenue going purely to loan payments. Most lenders treat a ratio above 30% as a red flag. If you already carry other debt, add up all the payments and divide by revenue to see your total exposure.
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Estimates only. Not professional business advice.
Business Information Disclaimer: Estimates only. Not professional business advice.
This calculator provides estimates for informational purposes only. Business results vary by industry, market conditions, and execution. Not a substitute for professional business consulting, accounting, or legal advice. Consult qualified professionals before making business decisions.