When a new business is started additional funds may require. Small business owners can rely on business loans. But it is important to know either you are able to pay back this amount. You should remember business loan without collateral have a higher interest rate than the loan with collateral. This repayment amount could b daily, weekly or monthly, depending upon the nature of your business revenue and the loan amount you borrowed. This repayment amount counted on the based on the loan’s interest rate, the total amount you have borrowed, and the amount of time to repay the loan. So, it is good practice to calculate business loan before you borrow it.
Business Loan Calculator:
In this article, we will give you step by step guide to calculate business loans.
Step 1: Suppose you are a small business owner and when you go to the bank and ask for a loan, you tell the lenders how much amount of money you need. Then he tells you monthly repayments and total time period or repayment. S$20,000 is the average loan amount that is given to any business owner with 2 years (24 months) of repayment. And the interest rate is 6%. In this step, you get 3 basic things to calculate business loan repayment. 1. Amount on loan. 2. The interest rate of 3. Tenure period.
Step 2: Calculate the monthly interest rate. In this case, the interest rate is 6%. So, divide 6 to 12 and count how much interest rate applies on a daily basis. In our scenario, it would be 0.005.
Step 3: Add 1 to interest every month. In our example 1+0.005=1.005.
Step 4: Raised the number calculated in step 3 to the power of the negative number of payment periods. In our scenario, 1.005 raised to the power of -24 equals 0.887186.
Step 5: Subtract the number calculates in Step 4 from 1. In to our scenario 1 minus, 0.887186 equals 0.112814.
Step 6: Multiply interest rate per month by the total amount you borrowed. In our scenario, S$ 20,000 times 0.005 equals 100.
Step 7: Divide the number in step 6 by the number calculated in step 5. In our example, 100 divided by 0.112814 equals monthly payments of S$866.42. If the calculation has more than two decimal places, round the number up to the next penny. For example, 0.0001 will round up to 0.01.
Is Calculating Business Loan on your own is a good Idea?
We hope our article will prove helpful to you. But is good enough to calculate business loans on your own? Being a human, you can make mistakes. Many banks give you this opportunity to calculate business loans online. They have designed business loan calculators online. Here we took an image of the business loan calculator.
Business loan calculator for amount S$20,000.
Business Loan Calculator Benefit:
Business loan calculator has many benefits including:
- Calculate business loan in seconds.
- Less chance of error.
- Calculate monthly repayments of different types of business loans to see which amount is payable for you.