Running a small business can quickly become very overwhelming. Keeping track of inventory, profit margins, customer accounts, and costs can be a real hassle.
If you want to expand your business it gets even harder, as now you have to take into account how much it will cost you, how much money you have to spare, and how you can meet your goals to get the funds you need.
One of the best ways to get more capital to put towards expanding your business is a small business loan. However, it can be a challenge to keep track of how much it will really cost you with fees, monthly payments, interest rates, and collateral.
Thankfully, a Camino Financial business loan calculators can be used to find out what your options are and how much a business loan will actually cost in the long run.
How do Business Calculators Work?
In order to make the best out of business loan calculators, you need to know how they work. Every one of these calculators is different, but most will ask you the following information:
- Loan Amount- The amount that you wish to be loaned. It is, of course, important to have a good idea of exactly how much capital you will need in order to reach your business goals.
- Number of Payments- This is how many payments you want to use to pay the loan back. These usually range from monthly payments for 2 years to monthly payments for 5 or even 10 years. Obviously the lower the number of payments, the higher the monthly payments will be.
- Monthly Interest Rate- The rate of interest you will pay on monthly payments. Keep in mind that if you have a lower credit score it will be harder to ask for a low-interest rate from most lenders.
Some banks and lenders will also take the next information into consideration:
- Credit Score- Your business’s credit score (or your personal credit score if you have not incorporated your business) will be used to estimate how high of an interest rate will be set for your loan.
- Amount of Time in Business- Another factor that lenders will look into is how long you have been in business for. If you have only been in business for a few months, you may have more risk associated with your loan (which will likely lead to a lower number of payments, more collateral, and higher interest rates).
Do Business Calculators Work? The Story of Lo-Lo’s
Lo-Lo’s Chicken and Waffles is an up and coming soul food restaurant owned by Larry “Lo-Lo” White Jr., located in Phoenix, AZ.
Lo-Lo’s chicken and waffles quickly garnered acclaim from many celebrities including Charles Barkley, Shaquille O’Neal, Muhammad Ali, Snoop Dogg, and more. This, of course, led to a huge increase in business for White, and he decided to turn his small soul food restaurant into a chicken waffle empire across the country.
White was smart and took a number of business loans in order to add new locations to his franchise. He investigated the best business loans for his business before even reaching lenders. He now employs over 200 people in various locations across the country.
White was even able to acquire a loan for 2 million dollars in favorable enough terms that it did not hurt his business.
What Can Business Calculators Tell You?
Business calculators will tell you how much your monthly payments will be based on the information you enter. This is important to avoid some of the common pitfalls that can cause business owners to struggle.
Two good rules of thumb are that your monthly payments should never exceed 80% of your monthly net profits, and the total cost of the loan should never exceed the expected return of the investment.
While business loan calculators sound like a too-good-to-be-true tool, the only way to find out if it’s really that good is to go out and use one yourself.