Short-Term Business Loan Calculator

A short-term loan is a type of business loan. The primary difference between a short-term loan and a term loan (the most common type of business loan) is that a short-term loan has a different fee structure. Instead of interest, short-term loans carry a one-time fee that is repaid along with the principal. For this reason, you must use a separate calculator, like Merchant Maverick’s Short-Term Loan Calculator, to estimate your loan payments, APR, and other metrics.

What Is A Short-Term Loan?

A short-term loan is a type of business loan in which the fee for borrowing is determined by a factor rate rather than an interest rate. Short-terms loans are typically used for working capital, seasonal business expenses, inventory and equipment purchases, or hiring and training.

The factor rate is a multiplier used to determine the total repayment. The repayment includes the loan fee, which is called a “fixed fee” because it does not accrue over time like interest. For example, if you have a factor rate of 1.2 and you’re borrowing $10,000, you will have to repay $12,000: $10,000 x 1.2 = $12,000.

In our calculator, you can enter either the factor rate or the total repayment. You will get the same results with both numbers.

Despite the “short-term” moniker, some loans of this type may have quite long term lengths. Traditionally, short-term loans carry term lengths that are 18 months or less, but some companies are starting to offer loans with terms of up to three years—or even longer. When in doubt, remember that if the loan has a factor rate and a fixed term length, it’s a short term loan. This principle applies even if the loan has a long term length.

Traditionally, short-term loans are repaid each weekday, but some lenders require payment on a weekly, or even monthly, basis. Payments are fixed, which means you will be paying the same amount each payment period.

For more information on this type of loan, check out our full guide to short-term loans.

How To Use The Short-Term Loan Calculator

Our short-term loan calculator can be used to estimate your periodic payments, your APR, the total repayment amount, and anything else you’ll need to make an informed borrowing decision when considering and comparing loan offers.

Confused? Here’s a short guide to all the calculator inputs and outputs.

Calculator Input

  • Loan Amount: The amount of money you are borrowing, including the origination fee. This number is expressed as a dollar amount.
  • Payback Amount OR Factor Rate (choose one based on the information you have; both will return the same results)
    • Payback Amount: The total amount you have to repay to your lender, including the loan amount and the fixed fee. This number is expressed as a dollar amount.
    • Factor Rate: The multiplier used to determine the payback amount. This number must be written as a decimal (such as “1.12”), not as a percentage.
  • Origination Fee: The amount deducted from your loan amount before your lender sends the money to you. Some lenders might call this fee a “closing fee,” an “administration fee,” or something else. This number must be entered as a percentage.
  • Repayment Frequency: How frequently you make payments. Repayment frequency can be daily, weekly, or monthly (“daily repayments” refers to every weekday).
  • Number Of Payments: The total number of payments you will make over the life of the loan. This number will vary depending on your repayment frequency. Depending on your payment frequency, you will make this many payments in a year:
    • Daily: about 260 payments
    • Weekly: 52 payments
    • Bi-weekly: 26 payments
    • Monthly: 12 payments
  • Maintenance Fees: Fees that are charged on an ongoing basis. Most lenders don’t charge fees of this nature, but we’ve added the option just in case. This number is expressed as a dollar amount.

Calculator Output

  • Total Repayment: The total amount you have to repay to your lender, including the original borrowing amount and all origination and maintenance fees.
  • Periodic Payment: The amount of your daily, weekly, bi-weekly, or monthly repayment.
  • Effective APR: The approximated annual percentage rate (APR) on your loan. This number can give you an idea of what the rate of borrowing would be if your loan had an interest rate.
  • Financing Cost: The total amount you are paying in fees. This number does not include the borrowing amount, but does include the origination fee and miscellaneous fees.
  • Cents On The Dollar: The total amount you have to pay in fees for each dollar borrowed.

Evaluating & Comparing Loan Offers

Our calculator will give you all the information you need to decide if a loan is right for you. If you don’t know what to do with that information, we can help. What follows is a short primer on how to use the calculator outputs to analyze and compare loan offers.

Periodic Payments

The periodic payment can estimate how much you’ll be paying each payment period. You can use this information to determine whether your business will be able to sustain repayments. Note that, unlike merchant cash advances, short-term loans carry fixed payments, so they will not fluctuate with your cash flow.

True Rate Of Borrowing

The effective APR (annual percentage rate) will give you an idea of what your APR would be if your loan carried interest. This number can be used to understand the rate at which you’re repaying money and compare your offer to loans with interest rates.

Be aware that if your effective APR is high, it’s because you’re paying money back at a very fast rate, not necessarily that you’re paying back a lot of money. To understand how much you’re paying, you have to look at the true cost of borrowing, which is explained below.

Check out our article on short-term funding and APRs for a more thorough explanation on the true rate of borrowing.

True Cost Of Borrowing

The last three numbers—the financing cost, total repayment, and cents on the dollar—tell you the true cost of borrowing.

The first two are self-explanatory. The financing cost tells you how much you’ll pay in fees, including the fixed fee, the origination fee, and any maintenance fees you might have. And the total repayment tells you how much you’ll repay total, inclusive of the financing cost and the borrowing amount.

The cents on the dollar is the total amount you’ll pay in fees per dollar borrowed. This is an easy-to-process number that helps elucidate the cost of borrowing. It’s helpful for comparing the total costs of different loans, even if they have different borrowing amounts.

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