If you’re looking to secure a loan, you need to know how you’ll repay it. Before borrowing funds for your business, it’s smart to calculate what your monthly loan payment would be and whether you have the cash flow to support new debt.
Business loans offer small businesses a way to access funding for growth more quickly than they could by saving, but irresponsible borrowing could lead to a business’s untimely demise. Here’s how to calculate your expected loan payments before accepting funding to be sure your business can meet its debt service obligations.
Loan factors you need to know
To accurately calculate what you would owe on an interest-only loan, you need to understand the following factors:
- The principal amount of the loan, which is the total amount you borrowed
- The term of the loan, or length of time over which the loan must be repaid with interest