Business Loan Calculator Formula & How It Works
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1] | DSCR = Annual Net Operating Income ÷ Annual Debt Service
- Debt Service Coverage Ratio (DSCR) ≥ 1.25 typically required
- SBA 7(a) loans: up to $5M, terms up to 10 years (25 years for real estate)
- Business loan rates: Prime + 2–8% typically
- Collateral often required for secured business loans
Business lenders assess repayment ability using DSCR — the ratio of net operating income to annual debt payments. A DSCR of 1.25 means income covers debt payments with a 25% cushion. DSCR below 1.0 means the business cannot service the debt from operations alone.