The balance, the deposit and the net proceeds
The amount borrowed is not always the amount available to spend. A lender can deduct an origination charge from proceeds, require charges paid separately or add allowed costs to the principal. Each treatment changes either net cash received or the payment schedule. Start the comparison with the money deposited for business use and list every required payment separately.
A retained cash reserve is different from an earned fee if it remains your asset and is later released. Its release date still matters to liquidity. Similarly, insurance, equipment tax and inventory costs may be part of the business project without being financing charges. Keep project expenses and credit expenses distinct, then show the overall cash budget. Mixing them can inflate one offer’s apparent loan cost and understate another’s.
Fixed rates, variable rates and ordinary amortization
A fixed rate installment loan has a known contractual interest rate, but you still need the term, payment frequency and any final balloon. With ordinary amortization, each payment covers accrued interest and reduces principal. A longer term lowers the payment for the same balance and rate, while generally increasing total interest because the balance remains outstanding longer.
A variable rate adds an index, spread, reset dates and possibly a floor or ceiling. This site retains prime at 7.00% as of 16 September 2026, but not every business loan uses prime. SBA variable caps are program rules, not limits on every conventional bank or online loan. Identify the actual index and stress a higher future rate without labelling a hypothetical increase as a forecast.
Public fee references are not universal offers
Chase’s published business lending page lists a $0 origination fee and says prepayment fees apply to loans greater than $250,000. Those details belong to that product description. They do not establish a universal fee level or promise approval. Its statement about prepayment also does not tell us the fee formula for a particular contract, so no formula is invented below.
A low fee does not automatically beat a lower interest rate with a fee. Compare complete cash flow schedules using the same net funding and expected holding period. A fee can be economical over a long term but costly if the loan is repaid quickly. Ask for an itemized fee list and a dated payoff illustration before comparing only the headline rate.
Term loan cost references and hypothetical inputs
Chase supplies the named published origination reference. All rates and the $3,000 comparison fee are hypothetical. The illustration does not combine separate lenders’ terms into an available offer.
| Cost item | Amount or range | What it means |
|---|---|---|
| Published origination reference | $0 | Chase business lending page; confirm terms for the actual product and offer. |
| Illustrative origination fee | $0 to $3,000 | An assumed 0% to 3% of $100,000, not a market range. |
| Illustrative interest rate | 10% fixed | Teaching assumption for 60 monthly payments, not a bank quote. |
| Calculated scheduled interest | $27,482 | Rounded interest over the full hypothetical term, excluding fees. |
| Total financing cost | $27,482 to $30,482 | Interest plus the assumed fee range, with unchanged balance and payments. |
| Early payoff costs | Contract specific | Published Chase threshold is above $250,000; no universal penalty formula is verified. |
Worked example: $100,000 over 5 years
Hypothetical example: a fixed 10% loan with 60 equal monthly payments, no balloon and no additional costs. Compare no origination fee with an assumed $3,000 fee withheld at funding. The principal remains $100,000 in both cases.
- Monthly rate = 0.10 ÷ 12 = 0.008333333. Monthly payment = $100,000 × monthly rate ÷ [1 less (1 + monthly rate) raised to negative 60] = about $2,124.70.
- Using the unrounded payment of $2,124.704471, total scheduled payments = $127,482.27. Interest = $127,482.27 less $100,000 = $27,482.27.
- With the assumed fee, net proceeds = $100,000 less $3,000 = $97,000. Total financing charge = $127,482.27 less $97,000 = $30,482.27.
- For fee inclusive annualization, solve $97,000 = $2,124.704471 × [1 less (1 + r) raised to negative 60] ÷ r. Monthly r is about 0.9436%.
- Nominal annualized APR = r × 12 × 100 = about 11.32%. Without the fee it is 10%, under these equal monthly payment assumptions.
- Compounded effective annual rate = [(1 + r) raised to 12 less 1] × 100 = about 11.93% with the fee, versus about 10.47% without it.
- The assumed fee adds $3,000 of dollar cost and about 1.32 percentage points of nominal annualized cost. It does not change the contractual interest rate or monthly payment in this withheld fee scenario.
If instead the lender finances the fee, principal and monthly payments rise. If you need exactly $100,000 of usable cash, the withheld fee case also leaves a funding gap. The examples compare contractual fee treatment; a borrowing decision should additionally compare equal usable proceeds and include the cost of filling any gap.
A formal business disclosure may define finance charge and APR using prescribed inclusions and timing conventions. Our example is a transparent cash flow comparison, not a replacement for a legally required statement. Rounding monthly payments in practice can create a slightly different final installment. Use the actual schedule when checking a payoff or disclosure.
What drives the cost up or down
Loan length changes both payment and total interest. Compare the sum of all payments and the remaining balance at your expected exit date. A low monthly payment caused by longer amortization or a balloon is not evidence of a low total cost. Keep the final balance visible in a separate line.
Credit and collateral can influence a specific offer, but this guide does not assign unverified pricing discounts to either. Ask for the actual security interest, guarantee requirements and covenants. The loss of flexibility or risk to pledged assets is important even though it is not a fee that belongs in the APR calculation.
Origination charges have greater impact when proceeds are small or the loan is held briefly. A fixed fee also represents a larger share of a smaller advance. Compare the fee inclusive schedule over your expected use period instead of assuming a full maturity APR answers an early payoff question.
Payment timing matters to operations. Monthly payments can be easier to budget than frequent automatic debits, but the actual cash pattern depends on the business. Test a slow collection month, show available cash after the payment and keep a reserve for ordinary expenses rather than relying only on annual profit.
Frequently asked questions
Is the lowest monthly payment the cheapest loan?
No. A longer term or balloon can reduce the monthly payment while increasing total interest or leaving a large balance due later. Compare full payments, fees and remaining principal at your expected exit date as well as the contractual rate.
Does a $0 origination fee mean no financing costs?
No. Interest, required third party charges and possible payoff costs may still apply. Chase’s published origination reference is one product detail, not an all in cost guarantee. Use the actual offer’s complete schedule and do not infer unlisted terms.
Why is APR above the 10% rate in the example?
The assumed fee leaves $97,000 available while payments are based on $100,000. Solving the cash flows gives about 11.32% nominal annualized APR. A compounded effective annual rate is higher still and should be labelled separately rather than treated as the same measure.
Can the SBA calculator price a conventional term loan?
It models SBA assumptions, including program fee and cap logic, not every conventional loan. It can illustrate amortization when assumptions fit, but its total cost should not be treated as a quote for a non SBA agreement. Read the methodology and actual fee schedule.
Does early repayment always reduce interest?
It often reduces future accrued interest on an ordinary declining balance loan, but a penalty, fixed charge or minimum interest provision can offset that saving. Get a dated payoff statement and compare the total exit amount with remaining payments before deciding.
Calculators and product details
- SBA 7(a) calculator with program assumptions
- Bank term loan product costs
- Online term loan product costs
Calculator results are educational estimates, not quotes. Check whether the payment timing, fee treatment and repayment structure match your document before comparing a result with a disclosed APR. Our methodology explains the existing models and their limitations.
Related guides
Sources
These primary sources support the rules and product mechanics discussed above. Hypothetical examples are our calculations from explicitly stated assumptions, not published offers. Pricing and program schedules change; verify the current document before relying on any figure.
- Chase: business lending terms: Published $0 origination fee and prepayment fee condition checked in October 2026. Actual rates require a specific offer.
- SBA: 7(a) loans: Official eligible uses and program overview. Current fees require the applicable fiscal notice.
- eCFR: 13 CFR 120.214: Federal rules for SBA variable rate bases, reset frequency and maximum spreads.
- New York DFS: commercial financing disclosure regulation: Official explanation of finance charge, APR and disclosure requirements for different commercial financing structures.
- CFPB: Regulation Z APR determination: Federal APR framework referenced by commercial disclosure rules; scope and transaction conventions matter.