Short-Term Business Loan Calculator
Calculate Your Payments and Total Cost of Borrowing
Table of Contents
- How to Use the Short-Term Loan Calculator
- Understanding Your Results
- What Is a Short-Term Loan?
- Short-Term Loan Benefits
- Short-Term Loan Disadvantages
- When to Consider Short-Term Loans
- Weighing Your Options
- The Final Say
A short-term loan can provide your business with the capital it needs to continue operations and grow. Before you choose a lender and come to terms, it’s critical that you understand exactly how those terms impact repayment and the total cost of borrowing.
With Fast Capital 360’s easy-to-use short-term business loan calculator, you can determine which financing option is most advantageous for your small business.
Here’s what you’ll need to know:
- The total amount you’re financing
- Estimated interest rate
- The loan repayment term (how long you have to pay off the loan) and repayment frequency (how often you are required to make payments)
How to Use Our Short-Term Loan Payment Calculator
When comparing short-term business financing options, interest rates are just one part of the overall loan agreement. You also need to consider the time you have to pay off the loan as well as any fees to understand the true cost of borrowing.
To calculate your monthly or weekly payments and the total cost over the life of your loan, enter:
- The desired loan amount. You can finance as little as $3,000 or as much as $500,000.
- The Estimated Interest Rate. Interest rates for short-term loans start at 10% but can go as high as 24% depending on your creditworthiness and the overall health of your business.
- The Loan Term and Payment Frequency. The hallmark of a short-term loan is an accelerated payoff structure. Generally, short-term loans reach maturity in 18 months or less. Because short-term loans are riskier for lenders, backers may require more frequent payments, on a weekly, rather than a monthly, basis.
Adjust the loan amount, term and frequency to see how much of an impact these factors have on repayment.
Understanding Your Results
The short-term business loan calculator will output the weekly or monthly Payment, the Total Repayment Amount and the Cost of the Loan. You can dive deeper into the calculations by selecting the Amortization Table to see a detailed, payment-by-payment schedule leading up to your final payoff date.
Here’s what the numbers tell you:
- Payment: This is the fixed amount you’ll repay each week (or month) in principal, interest and fees.
- Total Repayment Amount: Your total repayment amount estimates the amount you’ll pay over the life of the loan, including all principal, interest and fees.
- Cost of the Loan: This sum represents what the lender is charging you to finance the loan in interest and fees. If you pay off the loan early, you may be able to reduce this number, but be aware of prepayment penalties.
- Amortization Table: An amortization table details the loan balance, interest charges and the amount of principal you pay off with each payment.
With this information, it’s easy to evaluate different loan options, whether you’re comparing lenders or choosing between a 12- or 18-month term.
Using our short-term business loan calculator, you’ll see the true cost of financing. Frequently, borrowers are concerned with the weekly or monthly payment and whether or not they have enough cash on hand to cover the expense. While this is important, it’s only one part of the big picture. With Fast Capital 360’s short-term business loan calculator, you can spot the short-term lending program best suited to your individual needs.
What Is a Short-Term Loan and Is It the Best Financing Option for My Business?
Now that you’ve calculated what a short-term loan will cost, it’s time to determine if it’s the best financing option for your business. To make this process a bit easier, we’ve outlined what you need to know about short-term financing.
What Is a Short-Term Loan?
As its name suggests, a short-term loan functions as a condensed version of a traditional term loan. Your business will receive a lump sum of cash that it will pay off, plus interest, according to a predetermined payment schedule over a set term. And herein lies the difference: you’ll pay off short-term loans much quicker than a traditional term loan. This shortened payoff structure has its repercussions—some good, some bad.
Let’s start with the benefits.
The Benefits: Perks of Short-Term Funding
Speed of Funding
Short-term lenders aren’t beholden to the same regulations as banks. As a result, the underwriting process is far less involved. This means the application process is less comprehensive and paperwork heavy. Because of this, short-term loans are funded quickly. In many cases, borrowers can receive funding as soon as same day.
Easy to Qualify
Traditional term loans funded by banks often have stricter requirements than alternative online lenders. For example, many banks will only lend to businesses who’ve been in operation for two years or longer, with a good credit score and that can offer collateral, such as equipment or inventory.
Alternative lenders offer capital to a wider selection of business owners. While every short-term lender has different minimum requirements, if you can meet the following qualifications, you may qualify for some amount of funding:
- 1+ year in business
- $75,000+ annual revenue
- 540+ credit score
Low Cost of Capital
While short-term loan interest rates are higher than traditional term loans, they accumulate interest for a shorter period. As such, the cost of capital is generally (but not always) lower.
The Disadvantages: The Downside of Short-Term Loans
As we covered, short-term loans are ideal when it comes to the speed of funding, accessibility and total borrowing costs, but this funding type does have its disadvantages.
Let’s take a moment to review what these are.
Potentially Higher Interest Rates
Short-term loans typically come with higher interest rates than long-term loans. For the most qualified borrowers, interest rates start at 10%, but they can go much higher depending on your business’s creditworthiness and risk profile.
Why are short-term loans synonymous with high interest rates and fees? The reason for this is two-fold. First, short-term loans are typically easier for businesses to qualify for. As a result, the lender assumes more risk. High interest rates and fees ensure the lender’s investment is profitable considering the higher risk of default.
Second, you’re paying for the speed of funding. Unlike bank loans, short-term loans are often approved in just a few days—sometimes even the same day a borrower applies. As we mentioned earlier, this is made possible by an abbreviated underwriting process. While this helps lenders approve applications quickly, they’re taking less time to vet a business, which equals more risk for the lender and consequently higher interest rates and fees for the borrower.
Because short-term loans are riskier for the lender, you’ll be required to make more frequent payments, usually on a weekly, versus a monthly, basis. This can put a strain on your day-to-day cash flow. For this reason, it’s important to crunch the numbers before coming to terms on a loan agreement to determine what your cash flow can and cannot bear. This is where our short-term business calculator can help you.
When you plug the numbers into our loan payoff calculator, you might be shocked by how high the payments are. This, combined with the frequency of payments, may prove problematic for businesses with lower operating cash flow.
When to Use Short-Term Loans for Your Small Business
Before coming to terms on a loan offer, it’s important to assess your reasons for pursuing the loan and determine which funding type suits your needs.
As we discussed, short-term loans can be easier to obtain than their traditional counterparts. For this reason, this financing option is great for small business owners in need of funding fast.
But as you may have discovered after using our short-term loan calculator, the payments can be quite expensive and subsequently taxing on your cash flow. As such, it should be reserved for instances where you’re certain investments will yield a near-immediate return on investment.
For example, you might consider a short-term loan if you’re facing one of the following scenarios:
Bridge a temporary cash flow gap
If your business has a cyclical or uneven sales structure, a short-term loan can serve as the bridge your business needs to stay solvent during its slow season.
Prepare for your peak season
Similarly, short-term loans can enable your business to keep up with seasonal trends. For example, you may require extra capital to cover hiring costs and inventory during the holiday surge.
Capitalize on a time-sensitive business opportunity (e.g., material or inventory discount)
Opportunities don’t always present themselves at convenient times. For example, a supplier is offering a massive discount on materials when purchased in bulk. You don’t have the funds on hand to cover the purchase, but this is an opportunity you can’t pass. A short-term loan would be a perfect financing solution in this situation.
Using a Short-Term Business Loan Calculator to Evaluate & Compare Loan Offers
If you have more than one loan offer on the table, it can be difficult to identify the best option. Comparing each loan’s terms can make that decision easier.
First, consider how much each lender is offering. It may be tempting to pick the offer with the most favorable APR, but locking in a smaller loan than you need, even at a lower rate, isn’t beneficial if it’s not enough to cover a cash flow gap.
Next, consider the loan repayment term. A short-term loan will reach maturity in 18 months or less whereas a term loan can be amortized over a period up to 5 years. You need to know what repayment time frame works best for your business, and for the specific investment you’re making.
Finally, consider whether your business is in a position to repay the loan. If the loan payments dramatically shrink your cash flow, you’ll have to consider how comfortable you’ll be working with a smaller margin for the duration of the payoff term.
The Final Say on Short-Term Loan Payment Calculators
As you set out to secure funding for your small business, a loan calculator is an excellent place to start. By experimenting with different loan amounts, rates and terms, you’ll come away with a clearer understanding of what you can and cannot afford, as well as what repayment terms are feasible given your cash flow.
After running the numbers, you find that a short-term loan may be a viable funding option for your small business, apply.
The application for funding is fast, easy, secure and won’t impact your credit score. Best of all, you won’t have to wait days for an answer. In fact, in certain situations, funding is issued as fast as same day.
Throughout the whole process, a qualified Business Advisor will guide you every step of the way, starting with a deep understanding of your individual funding need. From there, he or she will match you with reputable lenders and help you identify those with the most favorable terms.