Business owners sometimes have more questions than answers. Take, for instance, contemplating getting a business loan and being in debt to the bank.
To get or not to get a business loan? That is the question.
Loans might seem like evil monsters lurking in the shadows ready to pounce when you don’t know how much one costs… Except when used correctly and smartly
A loan can actually help you grow your business (so instead of a monster it’s more like a fairy godmother).
To unravel the mystery behind how much you’ll pay to get a business loan, you should use a business loan calculator. Before you ever contact a lender, this technological tool will provide you with all pertinent financial information so that you can adjust your finances and repay a loan comfortably.
The following small business owner used the tool to discover a loan was an affordable option.
Printing corrugated boxes are what Dave loves to do.
He routinely looks for ways to improve the efficiency of his production line by upgrading technology. He purchases the newest equipment, software programs, and apps to streamline his business’s production line.
Up until now, he’s dipped into his savings account for needed funds. Unfortunately, that money is nearly gone. Dave knows for his business to excel he must stay ahead of the competition.
Every month he meets with a local group of business owners to share ideas. Another entrepreneur suggests that Dave use a business loan calculator to find out how much he can comfortably afford to borrow.
His friend points out that the tool shows the total interest and fees he will pay. Then, he can compare his net profit and total return on the investment to see if borrowing is a wise decision.
Dave had no idea such a calculator existed and that it was so easy to use.
He enters a loan amount of $30,000, which he estimates will cover the cost of upgrades, installation, and training. He selects a 48-month term and 1.75% interest rate. The business loan calculator quickly provides a cost summary. For convenience, he could reset the tool to create different scenarios.
His monthly payment would be $929 along with a one-time closing fee of $2,097. The total interest amounts to $14,591.00. Dave considered two other financial requirements to determine whether or not he should get a business loan.
- The monthly payment shouldn’t exceed 80% of the net profit.
- The total loan cost must not exceed the expected total return after making the investment.
After crunching the numbers, the $929 payment doesn’t exceed his average monthly net profits of $1,500. Moreover, his expected return on investment exceeds the total costs of the loan that amount to $16,688.
A business loan is a smart financial move for Dave.
Dave gets the loan and meets with a production line specialist to review the facility design and layout, quality control, and other processes. After purchasing an automatic case packer, Dave increases the speed and efficiency of the line by 15%.
In hindsight, Dave realizes that a business loan calculator was the best solution to answer his questions from the beginning.
When it’s time to expand your business, having more questions than answers is frustrating. But at least know you know how to answer the age-old question “To get or not to get a business loan?”.
In the example above, Dave used a business loan calculator and in a short time, he knew exactly what costs he’d pay. Just like Dave, you can use the handy tool to make an informed decision and move forward with your business plans.
Are you ready to let this free online tool help you make decisions about your business’s future?
To read more on topics like this, check out the business category.