In business, it’s relatively normal to spend money to get money.
However, you may lack enough cash to achieve your company’s growth vision. That’s where commercial loans come into play. But getting a loan and being in debt to a bank can seem… a bit scary. We know. But it doesn’t have to be.
A business loan calculator is the best financial tool you need to know how much money you’ll actually pay for a loan. This will allow you to make calculations and make sure that you won’t end up in debt after applying for a loan.
Business loan calculators: a case study
Have you ever had to come up with a budget for a business loan? Daunting, isn’t it?
This can be further worsened if you don’t have a business plan.
Let’s analyze a case scenario to understand how a loan can help you.
James is a retailer who sells electronic devices. The net profit from his business is around $5,000 every month, but he feels he could be making more profits, so he decides to research loans.
After deciding on a loan, the retailer searches for a loan calculator. With the loan calculator, he sets specific criteria that put the odds in his favor. James knows he needs to keep the repayments less than 80% of the profits he makes every month. He also wishes to ensure that the amount borrowed staggers below the total return that is expected.
The loan calculator computed the interest he had to pay. With this in mind, the retailer can quickly measure if he can meet the repayment deadline. He had all this information even before he applied for the loan, which meant he can gauge his ability to repay it.
After making several calculations, he decided which terms were most favorable for his small business and would bring him profits instead of debts.
James applied for the loan and got it. If he hadn’t used the calculator, he wouldn’t have been sure of which terms were favorable for his business and might have ended up biting more than he could chew. Fortunately, the loan did not drown him in debt. He was able to help his business grow and thrive.
Now his business is growing exponentially and he’s even thinking of applying for a second business loan.
How to use a loan calculator
How hard is it to use a business loan calculator? You might ask.
The honest answer is straightforward: as operating any calculator.
Just input the loan amount you need, the period you will take to repay the loan and other options. End by pressing the calculate button, which is conspicuously placed at the bottom.
Then wait for the magic to happen!
Business loan calculators are easy to operate and suitable for anyone who needs loan insights beforehand. However, the results you get will explicitly depend on what you input.
Are you ready to calculate?
Loans are helpful, but, at the same time, they’re incredibly stress-inducing. The notion of repayment and debt may be a nightmare.
As such, it is important to analyze every aspect of a loan and your ability to repay it ahead of time. However, you need to be careful while reviewing the numbers to make accurate conclusions.
The terms and conditions of service are also an essential part to consider as they dictate the contract and payments. Thankfully, business loan calculators should do the math for you.
So, are you ready to use a business loan calculator? Let us know in the comments how you will help your business grow with a business loan.