Most businessmen are no stranger to small business loans. They’re often familiar with its monthly or annual interest rates (negotiated or non-negotiated), payment terms (which likewise may or may not be negotiated) and the rest of the dynamics that come into play when taking out a business loan.
The good thing about this is that the smart entrepreneurs recognize loans (particularly when these are used for purposes of growth and expansion) as a good, sound investment that’ll ultimately impact positively on their bottom lines.
There may be those, however, who may be relatively young or new in the business world, who just might find getting a business loan sometimes intimidating and highly challenging since they come with a cost.
It could be because these businessmen’s ventures are fledgling or may be going through what is known in management circles as “growing pains”. In these situations, COSTS can be especially threatening since getting a business loan to create a perception of being “tied up” with an almost irreversible commitment. Realistically though, if one knows a loan’s actual cost and manages well the purpose for which it is taken, half the battle can be won already.
Know How to Calculate Your Loan’s Potential Costs
If you’re reading this article, there’s a good chance that you are either “toying with the idea” or seriously considering a small business loan. Either way, it won’t hurt you to know about the best way to calculate the cost of a business loan.
ENTER: The Business Loan Calculator. What it does is giving you a scenario of your monthly payment and how much the loan would cost you at the end of the loan’s term, along with some other minor costs (if any) as documentation or closing fees.
Whether or not you’re a computer wizard, it will take you no more than three to five minutes to give this small business loan calculator a try to know your costs.
Here’s how easy and simply it works:
Pretty much, like what we often did in high school, we fill in the blanks:
- Enter your desired loan amount.
- Choose the number of payments that you think will be apt with your business or financial situation (just choose from a set of 24-60 monthly payments).
- Opt for either 1% or 2.1% monthly interest rate. Either one is generally the going interest rate for most borrowers, but of course, common wisdom will tell you that depending on your credit standing, this may either go up or down … the operative principle being, the higher the credit standing the lower the interest rate. Just for purposes of this calculation use either one as a working figure.
- Click “Calculate”
The Results – Assess and Evaluate Carefully
The results will give you a payment scenario that will reflect how much your monthly payment will be, what the total cost of the loan will be at its end of the term, and the attendant closing fees or documentation fees (if any). It’ll be a clear picture of what you’ll need to reach that go-no-go decision on a business loan.
Give these numbers your utmost attention. Go over them carefully. Evaluate them, alone or with your trusted finance person. Look at those numbers from different angles and perspectives and try to determine its impact on your business on the short, medium or long term. At the end of the day, you’ll have to be the one to make the call.
Should you find the resulting initial payment scenario doesn’t appear to be compatible with your current business situation, you may click “Reset Calculator” and run through another set of entries to produce a different scenario. You can reset this till you find the “right numbers” that not only will make you most comfortable with but promise to boost your PNL in a big way.
A Small Business Loan: A Sound Investment for Growth
Whether you are looking at purchasing that efficient, time-saving and more productive piece of equipment or having your top notch sales and marketing people attend that important 5-day business management seminar and workshop out of the country, or just simply thinking of physically expanding your business site to accommodate working spaces for additional personnel, look at a business loan as a good investment for growing your business and making your company a stronger entity in the market you’re in.
In fact, some daring and enterprising businessmen have been known to take out small business loans to fund some results-oriented promotions and advertising that have led to a 25-35% increase in their gross revenues.
So, if not knowing what it will cost you to take out a small business loan is holding you back from achieving the full potential of your business, the business loan calculator courtesy of Camino Financial beckons. It urges you to spend no more than five minutes of your time to know the numbers that will help you decide and make a big difference for your company and your people.
About the Author: Suzanne Llanera
Suzanne Llanera is a writer for Camino Financial, an online lender for small business loans. Suzanne is also a professor of Management, Marketing and Advertising in one of the most prestigious Colleges in the Philippines. She has experience working with top international advertising agencies where she managed the accounts of a multinational bank and a digital, telecommunications company. Suzanne advocates keen creativity in the utilization of marketing and advertising budgets, especially for fledgling businesses.