There is a standard set of metrics that you will need to input to use a business loan calculator, and accurate, complete information will be necessary if you want precise and reliable outputs. The numbers you receive are only as reliable as the numbers you put in, so understanding exactly what you need and why beforehand will help you get an accurate answer.

A typical business loan calculator will request just a few pieces of information, with loan amounts, interest rates, and loan terms being standard. Below we’ll expand upon why this information is important, and what you can expect from a calculator once you’ve made your inputs.

Loan Amounts:

To start with your chosen loan calculator will need to know how much you are intending to borrow, so knowing ahead of time exactly what you need to borrow money for and how much you’ll need will be important, as it will directly affect how much your monthly repayments will be, as well as how much you’ll pay in interest.

To break it down into simple numbers as an example, if you input £10k vs £1k with the same interest rates, you’ll get a repayment breakdown that reflects that, and if you are going to make financial plans based around the repayments of your loan you can use those numbers. This is where business loan calculators become useful, as if you have already made a financial plan, and know you can afford a certain amount of money each month for a loan, you can keep inputting different amounts until your repayment numbers match your financial plan.

The Interest Rate:

Your loan’s interest rate will also be required as an input into your loan calculation, whether that be a fixed rate or variable, and it will largely determine the outcome of your total repayment requirements. A fixed interest rate will mean that your repayments stay the same throughout the length of your loan term, whereas variable rates can fluctuate based on the current market and wider economic conditions, so bear that in mind.

With regards to interest rates, you should also check how your prospective lender quotes its rates, and if you are on a variable rate, be aware that every month it could increase or decrease. Most loans are calculated on an annual interest rate, or APR, but regardless of which your loan is quoted for, ensure the numbers your input are accurate as even an additional percentage or two can drastically change the overall amount of your repayments.

Loan Terms:

Your loan term is the duration over which you’ll be repaying your loan, and will also play an important role for determining the size of your repayments, as well as the amount of interest you’ll pay on the principal amount. You will find across the market that shorter loans come with higher repayment amounts and less overall interest, though those rates will also be higher than long term loans. Through a long term loan you gain the advantage of being able to lower your monthly payments, and this can be ideal if you are planning your finances around a fixed repayment model.

Loan Repayment Schedule:

Your repayment schedule will determine how often you make repayments on your loan, and tends to be monthly for most lender’s facilities, however some more niche loan types like our revenue based business loan option at Nucleus requires weekly repayments. Be sure to check what your prospective lender’s criteria are, as it will be important for the accuracy of your repayment plan. The shorter the repayment period, the smaller you can expect your repayments to be, and some calculators will allow you to adjust this.

Possible additional information:

Some loans are more complex, and some may come with additional fees or down payments that you may find help to add to your total borrowing number, as this will ensure you can properly plan your finances around accurate repayment calculations. Below are some things you may also need to consider:

• Admin fees: You will find that some loans come with additional fees, and these are added to your total loan amount or in some cases charged upfront, so be sure to include these when you’re making your inputs into the calculator for a better estimate of the total cost.
• Down payments: In some cases such as a commercial mortgage you may need to make a down payment on your loan which will both reduce the loan principal amount and will affect the overall interest you pay across the term.
• Balloon payment options: A balloon payment is a lump sum that you pay at the end of your loan term, if necessary, and if required and possible, you should enter this number as it will also affect the accuracy of your loan repayment schedule.

There may also be further additional details that different lenders or service providers allow you to input into their calculators, so be sure to do your due diligence on the loan type you are seeking, and make sure your inputs are as accurate as possible, especially if you are using the loan calculator to plan your finances around your loan repayments pre-emptively.

Yes, business loan calculators are designed specifically to help businesses understand whether they will be able to afford a loan or not, and can help you to plan out exactly what type of facility will be manageable before you commit to it or even approach a lender for funding.

There are a number of things you can take away from a business loan calculator once you have accurately input your metrics and have received a determining output, so if you are considering using a loan calculator to plan out a business loan, below we’ll discuss some of the things that are worth considering when you get your calculations back.

Understanding The Repayments:

Business loan calculators are designed to break down your prospective loan into the monthly or quarterly payments that your lender will expect from you, and is an important output from the calculator as it will allow you as a business to understand how the loan will affect your cash flow. To get these numbers, you will typically need to input your desired loan amount, the lender’s interest rate, and the repayment term which is usually monthly to see how much your repayments will be.

To illustrate this we can use some basic numbers, so let’s say you’re considering a £10k unsecured business loan and you want to pay it back over 5 years and your lender is offering a 5% fixed interest rate with no other hidden fees. Your monthly repayment amount will be £188.20 per month, and knowing this, you can then plan your finances around the numbers. This helps you to avoid over-borrowing, and if you know you can comfortably pay off that much per month, you can then go ahead and try to secure the facility with your chosen lender.

Assessing The Total Costs:

Through a business loan calculator, you will also be able to determine how much interest you will pay on the loan principal, and this helps you understand how much you will need to pay on top of the borrowed amount. Using the same input figures as we used above, that being a £10k loan for 5 years with a 5% APR, we will find that across the span of the loan term, interest will cost us a total of £1292.24, bringing the total repayment to a sum of £1292.24. Knowing this total can also help you to decide whether the loan is affordable or not, and whether you should shop around for better interest rates or seek a lower amount of cash.

Comparing Different Potential Loans:

Following on with the idea of shopping around for a better loan option, this is where loan calculators can come so in handy because you can use them to adjust the numbers, and figure out for yourself exactly what would be a comfortable facility for your business. For example if the interest is too high and makes the loan unaffordable, you can either search for a lower interest loan, or you can lower the numbers of the principle or increase the repayment terms until you arrive at a figure that works for your business. In most cases, short-term loans will be more expensive with higher interest rates than longer-term facilities where there is less risk put upon the lender, and the rates will reflect that.

Potential Impacts on Your Business Operations:

While you are making a financial plan based around the repayments of your loan, it is also a good time to consider how the cash you are repaying each month could affect your daily business operations, and by doing this you can ensure that your ongoing cash flow will be enough to avoid any disruptions in areas like payroll or services. If you are a seasonal business, for example, you should ensure that during your slower months, you will still have enough cash to both make your loan repayments and continue your operation, and by planning thoroughly with a business loan calculator, you can ensure that you don’t put unnecessary strain on your cash flow.

With all these takeaways accessible through a business loan calculator, it makes them highly valuable tools when helping your business determine the affordability of a loan, and by showing you a combination of repayment estimates and total loan costs, while allowing you the ability adjust and compare figures, it means you can go on to make a well informed decision when it comes time to approaching a lender and trying to secure your facility.

Business loan calculators provide many advantages to business owners who are considering commercial funding and would like to understand whether they can afford the terms of a loan before committing themselves to it. This is achieved by being able to generate numerous loan scenarios with estimated repayment requirements, and then business owners can quickly determine what type of facility would be best suited for their company.

If you are considering using a business loan calculator and would like to get a more in depth breakdown of exactly how advantageous the use of a calculator can be, and why, keep reading, and we’ll expand on this subject to explain.

Simplified Decisions on Loans:

Business loan calculators are typically simple to use, and allow you to input a number of basic metrics such as the sum of cash you are seeking along with the current interest rates that your prospective lender offers. This means that, even if you are unfamiliar with how loan options work, you can take these metrics and get a complete breakdown of what you would need to repay on your loan, along with any interest, making it simpler to assess whether the loan you’re looking to secure is suitable for your budget, and also how it will impact your cash flow and daily operations. A business loan calculator will generate accurate information that you can use to work into your financial plans, and if it is affordable, means you can commit yourself with confidence to a facility that will help your business grow.

A Better Understanding of Costs:

The breakdown of the total costs associated with your loan is also another advantage that comes with using a business loan calculator, and this will include the cost of repaying both your principal and interest together, which, without understanding, may turn business owners away from what they perceive to be higher monthly repayments. A loan calculator will calculate your entire cost of borrowing, including both the additional interest on top of your principal and any additional fees. With the numerous metrics separated and explained, that being your monthly repayments, interest, and fees, you can gain a transparent detailing of exactly what your loan will cost. This also means you can avoid any hidden fees or miscalculations of the cost of interest and it allows you to plan and budget your finances more effectively.

It Saves Time:

Using a business loan calculator to find the repayment outcomes of different loan amounts and interest rates is a lot easier than approaching different lenders to find out what their options are, and with a calculator, you can also input the values of a number of different loans to compare which will best suit your business. It means you can rule out unaffordable facilities and narrow down your options before you start approaching lenders for the exact kind of funding you need, as well as being able to explain to them what you can afford and why. It also means you can approach your accountant or financial advisor with a clear idea and breakdown of the kind of loan you are seeking, and they can use those numbers to find niche lenders who may be able to offer those rates.

Comparable Loan Scenarios:

Going further into the idea of comparing loans through a business loan calculator, this can be achieved by changing the variables, whether that is the loan amount or term period, and you will get an accurate breakdown of each new facility. This is useful if you are considering two widely different loan types, with different ideas on how you can resolve a cash issue for your business. Whether your inputs reflect a short term loan of £5k with a 15% interest rate, or a long term loan of £15k at 4% interest, you can take the outputs and compare which would be more suitable for your business’s long term health. Comparing different loans in this way allows you to explore different financial strategies, then develop those around the best loan option available.

In all, business loan calculators bring many advantages to business owners who are curious about whether a loan is affordable for them at the current time, but also, it allows them to understand why those loans cost what they do, and then compare them to other facility rates. Through various lenders’ calculators, you can also get to grips with additional costs or other hidden fees, and get a good grasp of how much you can afford and how the repayments will fit in with your long term financial plans before you commit yourself to the loan.

Business loan calculators are very good at giving you an estimate based on the inputs you use, typically being the amount of cash you wish to borrow, the current interest rate, the period of time over which you are looking to secure your new loan, and any additional fees, which you can add to the total of your loan amount. Any outputs or calculations the calculator returns will be accurate based on those inputs, however should still only be regarded as an estimate before you approach a lender to secure a loan.

We advise that business owners who are seeking a loan first speak to their accountant or financial advisor before approaching a lender, and if you have used a business loan calculator to help you plan the use of a commercial facility, explain it to your advisor and let them give further feedback based on the outputs. While business loan calculators will be accurate in most cases, below we’ll explain how their calculations work, and why you should use them as a useful guide rather than a certainty.

Accuracy:

As mentioned above, a business loan calculator will take a number of basic metrics that are known as inputs, and use them in its formula to produce the breakdown of your loan repayments, known as outputs. The accuracy of your outputs will rely solely on the accuracy of your inputs, so if any of them are incorrect, whether that is because your lender has hidden fees, or you were unaware of a rise in interest rates, you could end up with outputs that are considerably different from the reality of what your loan numbers will be.

You may also find that certain lenders’ calculators only predict certain loan types, with term loans being the most typical across traditional lenders, however interest rates can also change across the course of a loan term, so while initial periods may be accurate, if your interest rates are liable to change then the latter course of your loans repayment will change. If your loan is fixed throughout the entirety of its term, this is where the majority of business loan calculators will be at their most accurate and reliable.

Discrepancies:

We have touched on interest rates being a cause of accuracy, or inaccuracy, however this is probably the primary reason for discrepancies down the line when or if your interest rates change, and you have to start paying more on your principal, potentially bringing the price of your repayments up by a considerable sum. This becomes more of a problem if, when making your financial plans based around one set of interest rates, you did not consider how changes in your loan could affect your cash flow and daily operations, which is why it is worth inputting and comparing a number of different loan scenarios — a topic we discussed in the previous FAQ above. There may also come a time where you renegotiate your loan terms, or make use of a loan consolidation plan whereby your initial loan terms will end up drastically deviating from any initial loans you had calculated previously, and are all factors worth considering.

Fees and Hidden Costs:

Hidden costs and additional fees are another metric that may affect the accuracy of your business loan calculator outputs. You will find that in the majority of cases, lenders will simply add any fees to the total of your loan, and you can do this too when making your calculations, however if you are either unaware of them, or unsure of their exact amounts this will result in inaccurate repayment sums, and it is something to be wary of. If you are strongly considering the use of a particular lender, we advise that you contact them, and run over all of their criteria and conditions so you can work out the best long term financial plan for your business.

Maximising The Calculators Accuracy:

Once you are confident that you have all of the correct information from your lender, once it comes time to make your inputs into the calculator, each time you run through the terms of a new loan it is a good idea to double check all of your numbers. This is especially important if you are comparing numerous loans as it can get easy to mix up certain loan amounts with different interest rates and term lengths. Once you have your repayment outputs from the calculator, you can then take these to your accountant or financial advisor, or even your lender if you wish to run the numbers by them, and get professional feedback. While your inputs may be correct, you may be drastically off with regards to something like interest rates, or mistaken in what interest rate your prospective lender currently offers, this way you can avoid any potentially costly errors before you commit yourself to a long or short term facility.

While business loan calculators do offer a useful and convenient way to get a close estimate of what you can expect to repay on commercial finance, it’s important to understand that they aren’t always completely accurate, especially with regards to variable interest rates, or rates that start with introductory offers and default to the Bank of England’s rates after 2, 3, or 5 years, as you will find with mortgages through traditional lenders. Always be sure to consult with your financial advisor, and ask your prospective lender for any important details if you aren’t certain you have all the information you need. Either way, business loan calculators offer a great way to preemptively make long-term financial plans and get to grips with exactly how well you can integrate the costs of a loan into your current business finances.