Question 1

How is a business loan payment calculated?

Accepted Answer

A standard amortizing loan uses the payment formula on principal, monthly rate, and number of months. A $250,000 loan at 9 percent for 10 years runs about $3,167 per month. Interest-only structures pay just interest for an initial period, then amortize over the remaining term at a higher payment.

Question 2

What is the difference between interest rate and APR?

Accepted Answer

APR includes origination fees and points, spread over the life of the loan, so it reflects what the money really costs. A 9 percent loan with 3 points can carry an APR near 9.7 percent. Always compare offers on APR over your realistic payoff horizon, not the sticker rate.

Question 3

Is a term loan or line of credit better?

Accepted Answer

Match the money to the need. Term loans fit one-time purchases with multi-year life: equipment, vehicles, buildouts, acquisitions. Lines of credit fit timing gaps: inventory cycles, receivables, seasonality. Carrying a permanent balance on a line is usually the most expensive way to borrow.

Question 4

Does paying extra principal really save that much?

Accepted Answer

On long terms, yes. An extra $500 per month on a $250,000, 10-year, 9 percent loan cuts roughly two years off the payoff and saves five figures of interest. Check for prepayment penalties first; some contracts claw back part of the benefit.

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