The logic behind a loan calculator


The logic behind a loan calculator


Technology is continuously advancing, and small businesses are bound to take this in stride and conform to the change.
With new and emerging trends, especially in determining loans, small business owners get a better understanding of what loans are and the cost that comes with it. Besides, they familiarize themselves and get to know what to expect if they sign up for one.
Understanding how lenders work can be quite tricky, especially without using Camino Financial’s business loan calculator. This technological tool helps calculate the interest rates, other loan costs, including loan repayment totals for the month.
With it, a business owner can calculate the amount they want for a business loan and they’ll know if they can afford it. It helps ensure that the investment does not drive the business to bankruptcy but help it grow.

Business loan calculators: How they work?

Doing the math: How loan calculators really work!

Doing the math: How loan calculators really work!


Getting down and performing loan calculations can be cumbersome. Besides, it may result in huge mistakes that can result in low credit scores, among others.
Using a business loan calculator is the only way out, especially if you know how they work, you also need to know what some financial jargon means or what it implies:

  • The principal amount is the amount of money you want to get.
  • The interest rate is a fee that the lenders charge for the issuance of the credit.
  • The time or term is the repayments that are to be paid until the whole amount is totally paid.
  • The business owner’s income, salary or business is operating income.
  • The APR (annual percentage rate) represents the total interest rate on the applied loan after all of the fees charged to the credit is all put together.
  • The application fee covers the expenditure incurred as lenders do research on your business for the loan application.
  • An origination fee covers the lenders’ administrative costs which are paid upfront.
  • Processing fees cover the incurred expenses when the lenders are issuing the loan.
  • Late payments charged for making late payments for any loan issued.
  • Closing fees is a term that refers to all the other expenses or loan costs that the business has to cover to get the intended investment.

Doing the math: How loan calculators really work!

To understand more thoroughly how a business loan calculator works, we’re sharing an example with you:
A business owner earns $5,500 in total revenue for a month. He makes a net profit of $3,000.
He is seeking a small business loan of $50,000 and has an excellent credit score. Using the business loan calculator, he enters the principal amount.
The investment comes with an interest rate of 7.75%, which is dependent on the calculator you as a business owner are using.
From there, he decides how long he will take to make full payments, which can range from 2 years to 5 years. He picks two years, i.e. 24 months. The lender for his specific loan is charging an APR of 2%.
The small business owner is expected to make payments of $2,127.01 every month. At the end of the repayment period, he will have made a total of $51,048.24 with an interest rate of $1,048.24.
The business owner, in this case, is eligible for the loan, and the business will be able to handle the loan. This is because the loan repayment does not exceed 80% of the business owners’ net profit with all the fees charged to it included. The rebate is only 70% of the net profit earned by the business.
Using a business loan calculator delivers the best calculations for your loan possibilities.
With it, any small business owner can run the numbers on any amount of money they desire.
All you have to do is enter all the available data, ensure that payments do not exceed 80% of the net business profit, and you are good to go.

A loan doesn’t have to be an unreachable dream

Get an understanding of the loan costs, interests, among other loan factors, as discussed above. It will help in developing a better loan financing project for your small business.
Be sure to try out a business loan calculator before deciding to apply for a business loan!

About temi
Thank you very much for reading this section of this article. This profile is used to post contribution from guest bloggers. Please read the author's bio section of each article, to see the identity of the real author.