Business Loan Affordability Calculator

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.

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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.

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How This Calculator Works

This tool amortizes the loan with the standard payment formula - payment = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1), where r is the monthly rate (APR ÷ 12) and n is the term in months - then stress-tests it against your cash flow. It computes operating cash flow (revenue − expenses), a debt-service ratio (payment as a % of revenue), and a coverage ratio (operating cash flow ÷ payment). It also projects revenue forward at your growth rate to show coverage at the end of the term, not just today.

The Coverage Ratio Verdict

The calculator's verdict mirrors how lenders underwrite. A coverage ratio (here, cash flow ÷ payment) ≥ 1.25 is "comfortable" - you generate $1.25+ of cash for every $1 of debt service, the typical minimum DSCR banks require. 1.0–1.25 is "tight": you can pay, but one bad quarter breaks you. Below 1.0 is "risky" - the loan consumes more than the business produces. Lenders also watch the debt-service ratio: total debt payments above ~30% of revenue is a red flag for most small businesses.

What This Model Simplifies

Operating cash flow ≠ net profit. This uses revenue minus expenses; true debt capacity should add back non-cash items (depreciation) and subtract taxes, owner draws, and existing debt payments.

Existing obligations aren't counted. A 1.4× ratio on this loan alone can still fail if you already carry other debt - lenders look at total DSCR.

Growth is assumed smooth. Compounding revenue at a flat rate ignores seasonality and the risk the growth doesn't materialize.

It ignores collateral, personal guarantees, and covenants that can accelerate the loan.

Using It Before You Apply

Run the "today" scenario with conservative revenue (use a trailing-12-month low, not your best month). If coverage is below 1.25, lengthen the term or lower the loan amount before increasing assumed growth - extending the term cuts the monthly payment but raises total interest, a real trade-off the result panel quantifies. If a loan only works on projected (not current) cash flow, treat it as speculative: you are betting the expansion the loan funds will perform on schedule.

Common Mistakes

Borrowing the maximum you qualify for instead of the minimum the project needs.

Comparing loans on monthly payment alone - a longer term lowers the payment but can double total interest.

Using gross revenue instead of cash actually collected (ignoring receivables and bad debt).

Financing operating losses or short-life expenses with multi-year debt - match loan term to the asset's useful life.

Business Loan Affordability Calculator

Frequently Asked Questions

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