Thinking of starting a new business or expanding your business operations? You would probably need a business loan.
An automated program such as loan calculator can be of great help to you for deciding how much you can afford to borrow
What is a business loan:
A new business or an expanding business always need some money to start its operations. While business ideas, concepts, decisions, etc., may come for free, there is no alternative for raising money.
Unfortunately, not all of us have enough money to start our business. Corporate houses looking for expanding their business too need enough financial resources to work on their expansion plans.
This is where a loan may come in handy, and is referred to as Business Loan. It is similar to other loans; however, it has a specific purpose; to further a business operation.
At times, it may also be referred to as a commercial loan or capital loan by some firms or websites. Also, this is the best accounting calculator that you are looking for.
When can a business loan be handy:
In business terms, you need enough ‘assets’ to set up a business; this includes, land for business, machinery for business, etc.
These resources are available both on lease and on sale. Either way, you need to pay money to obtain such resources.
This is where a loan comes into play. You can obtain loan for your business in the following cases:
- When you need finance for a new business startup
- When you need finance for expanding your current business or expanding business overseas
- When you want to have an additional loan to keep up with the growing demands of your business
- When you want to work on a new project without risking your current finances
- When you want to buy business insurance or pay your taxes
- When you are fulfilling a bulk purchase order
Government’s, all over the world, offer attractive tax rates, special business concessions or business subsidies to promote business growth, through the medium of different commercial loans.
Small loans for business are promoted not only by financial institutes but also the local governments.
This is why some people prefer to take loans rather than using their personal finances.
Types of business loans:
A number of different purposes are served by different types of loans. Looking for the right type of loan for your business financial requirements is a must before you jump to computations and take a loan.
This saves a lot of pain and hurdles latter. Some common types of loans are as follows
- Working capital loans or business startup loans
- Fixed asset loan or bridge loans
- Purchase order financing or commercial mortgage loan
- Construction loans or land loans or machinery loans or asset acquisition loan
- Letter of credit or line of credit or accounts receivable financing
- SBA loans (Small business administration loans) specially sanctioned by federal or governmental agencies.
Besides these, you can get simple loans against property or collateral. Look up local banks, financial institutes, government bodies that can offer you customized loans suitable for your business needs.
What is a business loan calculator:
In simple words, it is an online tool or desktop application which calculates the right loan amount for your business needs. It answers the following questions:
- How much can I borrow
- What resources and financial assets can be taken into consideration while borrowing
- Value of your current business property
- Value of mortgage against which you can borrow a loan
- What would be the interest rates, what would be the premium rate, etc
It will also tell you what would be the EMI (Equated monthly installments) payable. It will tell you the feasible and eligible amount based on your current assets, capital value, mortgages, loan tenure or the number of months of loan repayments.
Some advanced loan calculators also take into account, amortization or the adjustments to business accounts over specific periods.
The key details that are required for using the calculator for computing your loan are as follows:
- The loan amount you wish to borrow
- The annual interest rate or monthly interest rate that you need to pay
- Term of loan usually in years or months, before which the loan must be repaid along with the interest
- Service charges, taxes, local taxes
- Number of mortgage payments
- Monthly mortgage payment
Some advanced or customized calculators may need data for the following details as well:
- Annual or gross revenue expected cash flow
- Annual depreciation, annual amortization
- Cash dividends or cash discounts
- Property tax, stamp duty
- Expected maintenance and operating expenditure
- Vacancy factor, net income, especially, during the last financial year
Do research a bit and understand the guidelines to obtain a capital loan. This will help you use the calculator. If you are inclined towards a particular lender, such as your local bank, do visit its website or meet up with its loan manager or branch manager to understand the terms and conditions involved in procuring a loan.
You must enquire about the type of interest rate (fixed or floating), fixed charge coverage, change of control, liquidity requirements, financial reporting requirements, restrictions on adding additional debt or prepayment of the loan amount, premium services and features offered for businesses.
For partnered businesses, the records of the partners may be useful in obtaining a loan, personal financial statements, tax statements, statements, and records of estimated, past and current cash flow, your capital allocation statements, solid collateral and information about insurances and mortgages will help you obtain a business loan faster.
Besides these, lenders would also look into your character reports and records of any previous businesses you have, to decide the loan amount that can be borrowed by you.
While online business loan calculators may not always look into these details their use is a definite must; to provide you an understanding of the loans you can secure or interests or EMIs payable by you.
Most commercial/capital loan calculators are thus a good guide to help you apply for capital loan.
Do consider applying for a loan, but only after trying various combinations of borrowing, interest rates and tenures of payments on various online business loan calculators.
Here is wishing your business the best of profits!