When choosing a business loan or business credit, costs are an important consideration. Frequently asked questions are therefore about the monthly charges, the interest and the term. These can usually be calculated online and in advance. http://mainemusic.org/bad-credit-loans-you-can-get-the-best-online-loans-for-people-with-bad-credit/ for further explanation
What does a business loan cost?
An entrepreneur pays periodic and additional costs for his business loan. Periodic costs include the monthly repayment and monthly interest. Extra costs are the closing fee for the loan, possibly a fine for extra repayments and possibly a fine for converting the loan.
It is not possible to state exact amounts for the additional costs. These costs differ per provider of a business loan. Closing commission: for example 0.5% with a maximum of $ 500.
Interest on a business loan
With a business loan, all data is recorded at the time of taking out. For example, an interest rate is also agreed. This is a percentage of the loan, which is in addition to the loan to repay. It can be seen as a kind of supplement to be allowed to borrow.
The business interest for a business credit is between 3.8 and 20% on an annual basis. The interest is determined on the basis of the market interest rate, the risk profile and collateral. What these terms mean is explained under the heading ‘Important terms’.
Term of a business loan
We refer to how long a loan lasts. The duration of the term depends on the economic life of a business asset or of a property that is financed by the loan.
The term differs per provider and per loan. The minimum term of a loan is often one year. The term determines in how many years the entrepreneur must repay the loan. The vast majority of providers have a term of one to ten years. During the term, repayments must be made monthly. All costs for the loan, the closing commission and the interest must then be paid.
Often a certain amount can be repaid fine-free. Above that amount, a penalty interest must be paid. For example, an entrepreneur pays $ 125 to change or convert the business loan.
Calculate the monthly amount
Entrepreneurs who want to calculate the monthly repayment of their business loan, take into account the amount of the loan, the interest rate and the term of the business loan.
Example of a calculation
In an example, we calculate the monthly amount for a loan of $ 10,000, an interest rate of 5.4% and a term of 5 years. These data are known:
- Loan: $ 10,000;
- Interest rate: 5.4%;
- Duration: 5 years / 60 months.
In this example, the entrepreneur pays $ 190 per month to repay his business loan.