Commercial Loan Calculator: How to Calculate Payments, APR, and Total Cost in 2027

By American Business Center | Updated January 2027 | Business Loans

Understanding what a business loan actually costs requires more than the interest rate on the offer sheet. This guide explains how to calculate monthly payments, total loan cost, true APR (including fees), and debt service coverage ratio — the key numbers you need to evaluate any business loan offer.

Monthly payment calculation

For a standard amortizing loan (fixed monthly payments covering both principal and interest), use the standard loan payment formula:

Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]

Where: P = Principal (loan amount), r = Monthly interest rate (annual rate ÷ 12), n = Number of monthly payments

Worked example: $200,000 SBA loan

Loan amount: $200,000
Annual interest rate: 11.5% (prime rate assumption for 2027 + 2.5% spread)
Monthly rate: 11.5% ÷ 12 = 0.9583%
Term: 7 years = 84 months
Monthly payment: $200,000 × [0.009583 × (1.009583)^84] / [(1.009583)^84 - 1] = approximately $3,480
Total repaid: $3,480 × 84 = $292,320
Total interest cost: $92,320

Quick reference: monthly payments by loan amount and rate

Loan Amount	7% APR / 5 yr	10% APR / 7 yr	12% APR / 5 yr	25% APR / 2 yr
$50,000	$990	$833	$1,112	$2,671
$100,000	$1,980	$1,660	$2,224	$5,342
$250,000	$4,950	$4,151	$5,560	$13,355
$500,000	$9,900	$8,303	$11,122	$26,710
$1,000,000	$19,801	$16,606	$22,245	$53,420

Calculating true APR (including fees)

Lenders often quote interest rate but not APR. APR includes origination fees and other upfront costs in the effective rate. To calculate true APR when fees are involved:

Start with the net amount you receive: loan amount minus origination fees. Example: $200,000 loan with 2% origination fee = $196,000 net proceeds.
Calculate the interest rate on $196,000 that produces the same monthly payment as your $200,000 loan at the stated rate.
That higher rate is approximately your true APR.

Simple approximation: A 2% origination fee on a 5-year loan increases APR by approximately 0.7–0.8 percentage points above the stated rate. A 2% origination fee on a 1-year loan increases APR by approximately 2 full percentage points.

Debt Service Coverage Ratio (DSCR)

DSCR is the metric SBA lenders and most bank lenders use to evaluate whether a business can afford the loan. It measures how many times the business's net operating income covers its annual debt service.

DSCR = Net Operating Income / Annual Debt Service

Net Operating Income = Revenue minus operating expenses (before interest, taxes, depreciation)
Annual Debt Service = All loan payments, existing and new, over the year

Example: Business earns $500,000 revenue, has $340,000 operating expenses = $160,000 NOI. Existing debt service: $24,000/year. New loan payment: $41,760/year. Total debt service: $65,760/year. DSCR = $160,000 / $65,760 = 2.43. This is a strong DSCR; most lenders require 1.25 minimum.

MCA cost calculation: factor rates to APR

Merchant cash advances use factor rates, not interest rates. Converting to APR requires knowing the repayment timeline:

APR equivalent = (Fee ÷ Advance Amount) × (365 ÷ Days to Repay) × 100

Example: $50,000 advance, factor rate 1.30 (repay $65,000 total), repaid over 180 days:

Fee = $15,000
APR = ($15,000 / $50,000) × (365 / 180) × 100 = 60.8% APR

The same MCA repaid in 90 days: APR = ($15,000 / $50,000) × (365 / 90) × 100 = 121.7% APR

Bottom line

Three numbers matter most when evaluating a business loan: monthly payment (can your cash flow service it comfortably?), true APR including fees (how does it compare to other offers?), and DSCR (does the loan meet lender standards and leave appropriate cushion?). Calculate all three for every serious loan offer before accepting. The lender who seems most expensive on stated rate may be cheaper than a lender with lower rate but higher fees, depending on the term length.