Wondering over and over how much business loan costs you’ll pay can eat away at your resolve. When you’re ready to rev up your business to increase profit, not having answers may seem like the killer fish in the 1975 Jaws movie is about to close in. By finding out beforehand your loan’s monthly payment amount and the total interest and closing fees you’ll pay, you know how much money you can spend to make money. A commercial loan calculator helps you answer these financial questions before you ever approach a lender. You’re in control of your finances from the get-go. Here’s how a business owner used the financial tool to her advantage.
Constanza Knew Business Loan Costs in Advance
The Hispanic entrepreneur worked in her father’s pizza restaurant before she inherited the business. Now, 10 years later, Constanza increased sales so she makes $1,200 in profits each month after deducting expenses. Recently, a construction firm added two big-box stores near her restaurant which continues to bring in new customers. She feels this is the perfect time to renovate the building and add more space for customers as well as construct a larger storage room for supplies. Constanza has never taken out a small business loan and doesn’t know what to expect. Her sister works for an accountant who suggests that a commercial loan calculator would help her decide how much to borrow. She finds out immediately that the online calculator is easy to use. All she does is enter the desired loan amount and select repayment terms between 24-60 months and click on an interest rate. The financial tool displays total interest paid, closing fees and her monthly payment amount. By resetting the calculator, she can input different information to determine costs that fit within her budget. Constanza decides that $30,000 is an adequate sum to complete projects without carrying exorbitant debt. The affordable $978 monthly payment paid within 48 months means she will pay $16,947 in interest and a one-time $2,097 closing fee.
What Else Should Constanza Consider?
Two other considerations are of paramount importance before Constanza can acquire a small business loan. She should not move forward unless loan details meet the following criteria:
- Monthly payments should not exceed 80% of her monthly net profit.
- Total loan costs should not exceed the total return expected after the investment.
Constanza projects that her monthly profit should be about $1,100. Therefore, the monthly payment of $978 doesn’t exceed 80% of her monthly net profits. By paying off the loan in 4 years, she will realize a total extra profit close to $37,000, an amount that clearly exceeds the cost of the loan. During that time, she will have increased assets by adding more square footage and making improvements to the building. She feels confident that getting a small business loan is a good decision to grow and expand her business.
Don’t Let Business Loan Costs Bite Away at Your Confidence
The simple financial tool helped Constanza see costs on paper to allay her fears so she knew what to expect. That’s true for anyone who contemplates taking out a business loan to purchase equipment, pay unexpected expenses, or make improvements. Just like Constanza, you can make an informed decision ahead of time so securing funding for your business doesn’t feel risky or scary. A commercial loan calculator lets you see instantly what loan amount and costs provide an affordable injection of needed cash so your business flourishes. You may still feel like you’re sailing through unchartered waters but loan costs will no longer be a concern.