Business Loan Calculator
What the loan costs, what it really costs after fees — and whether the business generates enough to service it comfortably.
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How it works
The repayment itself is a standard amortising calculation. What makes a business loan different is the debt service coverage ratio: the annual operating profit divided by the annual loan payments.
Lenders almost always set a minimum coverage covenant, commonly 1.25. Below that the loan is unlikely to be approved, and if the ratio falls below it later the covenant can be breached even while every payment is being made on time. It is worth checking before applying rather than after.
DSCR = annual operating profit ÷ annual debt service
- Debt service — twelve months of loan repayments
- DSCR — how many times profit covers those repayments
- Effective rate — the true annual cost once arrangement fees are included
Worked example
Borrowing 8,000,000 over 5 years at 13% with a 1.5% fee, against 4,200,000 of operating profit
Inputs
Results
A DSCR of 1.92 gives real headroom — profit could fall by nearly half before the covenant came under pressure.
Frequently asked questions
What DSCR will a lender want?
Typically at least 1.25, and often 1.4 or higher for unsecured lending or riskier sectors. Below 1.0 the business does not generate enough to cover the repayments at all.
Should I borrow over a longer term to improve the ratio?
It does improve coverage by lowering the annual payment, and it also raises total interest substantially. Match the term to the life of what you are funding — do not finance three-year equipment over ten.
Are arrangement fees negotiable?
Frequently, particularly for larger facilities or where you have competing offers. Because the fee is charged up front, it affects the effective rate far more on a short loan than a long one.
Is my data sent anywhere?
No. The calculation runs entirely in your browser. Nothing you type is transmitted to us or stored.
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