Small Business Loan Calculator

By: EconomyWatch Content   Date: 30 November 2009

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Small businesses require financial stimulus to sustain themselves, as well as to expand. With their limited funds-at-disposal, small businesses often resort to business loans for their expansion and ramping needs. In such cases, being aware of the standard terms and conditions of business loans help in finding the most economical loan and a small business loan calculator makes that job easier.

 

A small business loan calculator lets you know the monthly payment, without the need for crunching the numbers. These calculators are extremely simple to use and require only basic information, such as the interest rate, loan amount and duration. To top it all, their speed becomes almost a strategic benefit and lets borrowers compare different loans on the basis of their monthly payments.

Small Business Loan Calculator: Reverse Computing

Although there are many small business loan calculators on the web, many websites have started offering the reverse process as well, where borrowers can calculate the interest rate on the loan. This finds acceptance with borrowers, as there have been cases where creditors have persuaded them with rates that in reality were not offered.

This process works by asking for the following information:

·        Loan amount, P

·        Monthly payments, M

·        Number of months, N

Calculating the interest rate follows these steps:

·        First the number of months, N, are multiplied by the monthly payment, M.

·        The loan amount, P, is subtracted from the product of the first step. M*N – P

·        The result is multiplied by 2. {2*(M*N-P )}

·        The end product is divided by the product of number of months, N, and the loan amount, P.

For instance, if the loan amount, P, is $20,000 with monthly payments of $450 for 60 months, then according to the formula, the interest rate equals 12.5% (approximately).

Advantage of a Small Business Loan Calculator

Besides being a source of comparison between multiple business loans on the basis of their monthly payments, a small business loan calculator offers speed and gives business owners that extra time to strategize. In fact, it is a tool that should always be referred to first check the monthly payments and then evaluate the payment capabilities.


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