Business Loan Affordability Calculator

Monthly payment (amortization formula)

PMT = P × r(1+r)ⁿ / ((1+r)ⁿ − 1)

P = $50,000, r = 0.006250, n = 60 mo

= $1,001.90/mo

Month 1: $312.50 goes to interest, only $689.40 reduces principal. In early months, most of your payment is interest — the balance decreases slowly at first, then accelerates as principal builds.

Standard amortization PMT formula — FTC Truth in Lending Act; SBA Lender Guidance

Total interest over loan term

totalInterest = (PMT × n) − loanAmount

= ($1,001.90 × 60) − $50,000

= $10,114 (20.2% of principal)

You pay 20.2% of the loan in interest over 5 years at 7.5% APR. Total repaid: $60,114 (principal + interest).

Net operating income

NOI = monthlyRevenue − monthlyExpenses (before loan)

= $15,000 − $9,500

= $5,500/mo NOI · $66,000/yr

Your net operating income before loan service. The loan payment of $1,001.90/mo represents 18.2% of your NOI — leaving $4,498/mo after debt service.

NOI definition — IRS Schedule C; SBA Lending Guidelines SOP 50 10 7

DSCR (Debt Service Coverage Ratio)

DSCR = annualNOI / annualDebtService

= $66,000 / $12,023

= 5.49 — Strong

DSCR > 1.5 — comfortable coverage. Most lenders will approve this loan easily. DSCR < 1.0 means income literally can't cover payments. DSCR = 1.0 means no margin for error. Most SBA and conventional business lenders require DSCR ≥ 1.25; some premium lenders require 1.35+.

DSCR standard — SBA SOP 50 10 7; Federal Reserve SR 12-17 (Guidance on Credit Risk Management)

Max affordable payment at DSCR 1.25

max_PMT = annualNOI / 1.25 / 12

= $66,000 / 1.25 / 12

= $4,400.00/mo · supports ≈ $219,583 loan

Your NOI can comfortably service a loan up to $219,583 at DSCR 1.25 — $169,583 more than this $50,000 loan.

Revenue needed to hit DSCR 1.25

revenue_needed = expenses + (PMT × 1.25)

= $9,500 + ($1,001.90 × 1.25)

= $10,752/mo — you already exceed this at $15,000

Your current revenue exceeds the minimum needed — a positive sign. Revenue can drop by $4,248/mo before you hit the DSCR 1.25 threshold.

Payment as % of NOI

paymentBurden = monthlyPayment / monthlyNOI

= $1,001.90 / $5,500

= 18.2% of NOI goes to debt service

18.2% of your net operating income goes to this loan payment — leaving 81.8% for operating margin, owner distributions, or reinvestment. Most financially healthy businesses keep total debt service below 30–35% of NOI.