Calculate how much a business loan will cost you

July 21, 2016 - Tags: Financing Planning

This guest blog post is provided by the Business Development Bank of Canada (BDC). BDC is the only bank devoted exclusively to entrepreneurs. It promotes Canadian entrepreneurship with a focus on small and medium-sized businesses. With its 110+ business centres from coast to coast, BDC provides businesses in all industries with financing and advisory services. Its investment arm, BDC Capital, offers equity, venture capital and flexible growth and transition capital solutions.

Getting a business loan can be a great way to grow your business and make it more competitive and profitable. A business loan can help you finance an acquisition, buy real estate, invest in new equipment and bolster your working capital.

Beyond allowing you to grow your business, taking out a loan can also help you conserve your everyday cash to guard against unexpected events.

Thinking through your decision

Whether you're about to take out a business loan or only beginning to think about it, a number of factors beyond the interest rate should be considered when shopping for your loan.

  • The loan terms offered by the lender — A longer repayment period might mean higher overall costs for borrowing, but it can be a good way to ensure you don't put too much pressure on your cash flow. 
  • The percentage of the project the lender will finance — This amount will affect how much of your own money you need to invest as well as whether you need a second lender to fund your project.
  • Hidden fees — Many lenders charge administration fees or application fees. Make sure you take these into account as you calculate your total cost.
  • Flexibility on repayments — Would your bank allow you to temporarily suspend your principal repayments while you get a project going or if your business runs into difficulty? Would you be penalized for paying off your loan ahead of time?
  • Collateral — What guarantees does your banker require? You need to know what assets you risk losing before you decide whether the loan is right for you.

Calculate your monthly payments

To provide you with more information before you take out a loan, BDC has created a business loan calculator for entrepreneurs.

This free tool will help you calculate your monthly payments and the interest cost for financing your project. Additionally, you will have the option to view and print a complete loan amortization schedule.

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