Business Loan Affordability Calculator
Estimate the maximum business loan you can afford based on your monthly revenue, operating expenses, existing debt obligations, and lender requirements.
Lenders typically require 1.25 – 1.50. Default: 1.25
Formulas Used
1. Net Operating Income (NOI):
NOI = Gross Monthly Revenue − Monthly Operating Expenses
2. Maximum Total Monthly Debt Service:
Max Debt Service = NOI ÷ DSCR
3. Maximum New Monthly Payment:
Max New Payment = Max Debt Service − Existing Monthly Debt Payments
4. Maximum Loan Amount (Present Value of Annuity):
P = PMT × [1 − (1 + r)−n] ÷ r
Where: PMT = Max New Monthly Payment, r = Monthly Interest Rate (Annual Rate ÷ 12), n = Loan Term in Months
5. Effective Annual Rate (EAR):
EAR = (1 + r)12 − 1
6. Debt-to-Revenue Ratio:
DTI = (New Monthly Payment ÷ Gross Monthly Revenue) × 100
Assumptions & References
- The Debt Service Coverage Ratio (DSCR) is the primary metric lenders use to assess business loan affordability. Most lenders require a minimum DSCR of 1.25, meaning NOI must be 25% greater than total debt payments. (SBA guidelines, commercial lending standards)
- Operating expenses should include all recurring costs (rent, payroll, utilities, COGS, insurance) but exclude existing loan payments, which are entered separately.
- The loan payment formula assumes a fixed-rate, fully amortizing loan with equal monthly payments (standard amortization).
- This calculator does not account for taxes, depreciation, or amortization (EBITDA-based underwriting). For SBA loans, lenders may use a global cash flow analysis.
- Typical business loan interest rates range from 6%–30% depending on lender type (bank, SBA, alternative lender) and borrower creditworthiness. (Federal Reserve, SBA.gov)
- SBA 7(a) loans have terms up to 10 years (120 months) for working capital and up to 25 years for real estate. (SBA.gov)
- Results are estimates only. Actual loan approval depends on credit score, collateral, business history, and lender-specific criteria.