Business Loan & Equipment Finance Calculator

What this tool does

This calculator turns a finance quotation into the four numbers that actually decide whether a deal is good: the payment, the total interest, the effective annual rate once fees are included, and the total cost of ownership. It then shows the full amortisation schedule behind those numbers, period by period, so the arithmetic is visible rather than asserted.

It is deliberately opinion-free about rates. Every rate, fee, term and balloon is entered by you, from the lender's own paperwork. Nothing about any country's tax treatment, subsidy scheme or disclosure rule is built in, because those change constantly and differ by jurisdiction. What the tool guarantees is that the arithmetic on your figures is right, reconciles to the cent, and can be printed as a document you can put in front of a lender or an accountant.

Use the Calculator tab for a single agreement, the Schedule tab for the period-by-period breakdown and CSV export, and Compare offers when you have two or three quotations and need to know which is genuinely cheapest rather than which has the smallest payment.

How loan interest actually works

An instalment loan is an annuity. The lender advances a sum today; you promise a series of equal payments. The payment is set so that the present value of your promises, discounted at the periodic interest rate, equals the amount advanced. That is the whole idea — everything else is bookkeeping.

Write P for the amount financed, i for the periodic interest rate, n for the number of payments and B for any balloon due at the end. The present value of an ordinary annuity of 1 per period is the annuity factor:

The factor is the sum of a geometric series: discount 1 payment by one period, 1 by two periods, and so on, and the series collapses to that closed form. Setting the discounted payments plus the discounted balloon equal to the advance and solving for the payment gives:

Payment timing matters more than people expect. Paying at the start of each period means every payment sits with the lender one period longer, so each one is worth (1 + i) more. The payment therefore falls. Equipment leases and many hire purchase agreements are written in advance for exactly this reason — it makes the monthly figure look better without the lender giving anything away.

The schedule then works period by period. In arrears: interest for the period is the opening balance times i; whatever is left of the payment reduces the balance. In advance: the payment comes off the balance first, and interest accrues on the reduced figure. Either way the closing balance is the opening balance less the principal portion, and the last payment is adjusted by a few cents so the schedule closes exactly on zero — or exactly on the balloon. The Schedule tab prints that reconciliation check at the bottom.

Nominal, effective and APR — the three numbers people confuse

A nominal annual rate is a quoting convention, not a measurement. "7.2 % per annum, monthly rests" means the lender charges 7.2 ÷ 12 = 0.6 % each month. It says nothing directly about what a year costs, because the monthly charges compound.

The effective annual rate (EAR, or AER on savings) is the measurement. It answers: if this went on for a year with nothing paid, what fraction of the balance would have been added?

Same headline rate, three different answers. The more often interest is applied, the more it earns on itself, so the effective rate rises. At business rates the gap is a few tenths of a point; on expensive credit it is several points. Never compare a monthly-rest quote with a quarterly-rest quote on the nominal number alone.

APR is a third thing again: a regulated disclosure that folds fees into the rate. Crucially, the conventions differ by jurisdiction. In the United States, Regulation Z requires the annual percentage rate to be computed by the actuarial method set out in Appendix J, and it is disclosed as a nominal annualisation — the periodic rate multiplied by the number of periods — with a tolerance of one-eighth of a percentage point for regular transactions and one-quarter for irregular ones. In the European Union, the annual percentage rate of charge (APRC) is defined by an equation that sets the present value of all drawdowns equal to the present value of all repayments and charges, and it is expressed as an effective annual rate. Two mathematically correct disclosures on the same contract can therefore print different numbers.

This tool reports both: the effective annual rate including fees (the EU APRC-style figure) and the nominal annualisation of the same internal rate of return (the US APR-style figure). Neither is "the" answer — use whichever your lender is quoting, and compare like with like.

Why fees usually matter more than the headline rate

An arrangement fee, documentation fee or option-to-purchase fee is interest wearing a different hat. If the fee is added to the loan, you also pay interest on the fee for the whole term. If it is paid up front, you receive less cash than the loan says you borrowed. Either way the true rate rises, and it rises hardest on short terms and small amounts, because the fee is spread over fewer periods and a smaller base.

Take 30,000 over 36 monthly payments at 6.0 % nominal. The payment is about 912.66 and total interest about 2,855. Add a 900 arrangement fee to the loan and the payment rises to about 940.05 — but the effective annual rate including that fee climbs to roughly 8.1 %, against 6.17 % effective on the rate alone. A lender offering 6.0 % with a 900 fee is more expensive than a lender offering 7.5 % with none. The headline rate lost by nearly two points of real cost.

This is why the Compare offers tab ranks on total cost of ownership — deposit, every payment, any balloon and any fee paid up front — rather than on rate or payment. It is the only ranking that cannot be gamed by moving cost between the rate, the fee and the term.

Balloon and residual payments — and the risk at the end

A balloon (called a residual value on a lease) is a lump sum left outstanding at the end of the term. Because that slice of principal is never amortised, the regular payments only have to cover the interest on it plus the rest of the capital, so the payment drops noticeably. That is the attraction, and it is real: for cash-flow reasons a balloon can be exactly the right structure for an asset that earns steadily and holds value.

The risk is equally real. You pay interest on the balloon for the entire term, so total interest is higher than on an otherwise identical fully-amortising deal. And at the end you owe a large sum in one go. There are only three ways out: pay cash, refinance (at whatever rate exists then, which nobody can promise you today), or sell the asset and hope it fetches at least the balloon. Where the balloon is set above the realistic resale value — which happens — you are left with negative equity on a machine you no longer want.

Set the balloon in this tool and the balance chart marks it with a dashed line, the schedule closes exactly on it rather than on zero, and the result panel shows it as a percentage of the amount financed. Treat anything above a third of the advance as a decision that needs its own plan, written down, before you sign.

Finance lease, operating lease, hire purchase or loan?

These four are genuinely different arrangements, and the confusion costs businesses money.

• Structure — Who owns it — End of term — Typical use
• Loan — You, from day one — Nothing happens — the debt is simply repaid — Any asset; maximum flexibility to sell or modify
• Hire purchase — The lender, until the final payment — Title transfers on the last payment (often with a small option fee) — Equipment you intend to keep for its whole working life
• Finance lease — The lessor — Secondary rental, sale to a third party, or return — you rarely take title — Where the lessee takes substantially all the risks and rewards of the asset
• Operating lease — The lessor — Asset goes back; lessor carries the residual value risk — Assets that date quickly or are needed for part of their life

Under IFRS 16, issued by the International Accounting Standards Board and effective for reporting periods beginning on or after 1 January 2019, the lessee-side distinction between finance and operating leases has essentially gone: a lessee recognises a right-of-use asset and a lease liability for all leases of more than twelve months, unless the underlying asset is of low value. Lessors still classify leases as finance or operating. The commercial differences — who carries residual value risk, who can sell or modify the asset, what happens at the end — remain very much alive, and they are what you are actually negotiating.

The arithmetic in this tool applies to all four. A lease is an annuity due with a residual; hire purchase is usually an annuity in arrears with an option fee; a loan is the plain case. Enter the payments the paperwork states, set the timing correctly, and the effective rate is comparable across structures. What the tool cannot do is tell you the accounting or tax consequence of each — that is a conversation with your accountant, and it can easily be worth more than the rate difference.

Overpaying strategically

Every extra unit of currency you pay goes straight to principal, and every unit of principal removed stops accruing interest for the whole remaining term. That is why overpayments are so powerful early and so weak late: an extra 200 in month 3 of a five-year deal avoids interest for 57 months, the same 200 in month 55 avoids it for five. If you are going to overpay, front-load it.

Two levers are modelled here. A regular extra payment added to every instalment shortens the term steadily. One-off lump sums — a good quarter, a tax refund, a machine sold — take a step out of the balance at a period you choose. The overpayment panel reports periods saved and interest saved against the contractual schedule, and the balance chart overlays the two curves.

Three cautions. First, check the agreement for early settlement or early repayment charges; on business finance these are common and can wipe out the saving entirely. Second, confirm that overpayments reduce the balance rather than being held as a credit against future instalments — the difference is exactly the interest saving. Third, compare the interest rate you would avoid against what the cash would earn or protect elsewhere. Clearing 6 % debt is a guaranteed 6 % return, which is excellent; it is a poor choice if it leaves you unable to meet payroll in a slow month.

Questions to ask a lender

• What is the total amount payable, in cash, from today until the end — including every fee?
• Is the quoted rate nominal or effective, and how often is interest applied?
• What is the disclosed APR or APRC, and does it include the arrangement, documentation and option fees?
• Are payments in advance or in arrears, and does the first payment fall on drawdown?
• What exactly is the fee schedule — arrangement, documentation, option to purchase, annual servicing, late payment?
• Is the rate fixed for the whole term, or can it move? If it can move, against what and how often?
• What is the balloon or residual, how was it set, and what happens if the asset is worth less than that?
• What is the early settlement figure at, say, month 24 — and how is it calculated?
• Are overpayments permitted, do they reduce the balance immediately, and is there a charge?
• Who owns the asset during the term, and what are the insurance, maintenance and return-condition obligations?
• What security or personal guarantee is required, and from whom?
• What happens on a missed payment, and at what point can the asset be repossessed?

Ask for the answers in writing, then put the numbers into this tool and see whether the effective rate matches what you were told. Where it does not, the gap is usually a fee somebody forgot to mention.

Your data

Everything stays in your browser. There are no network requests, no accounts and no analytics; the file works offline from your own disk. Save writes to this browser's local storage and flashes a timestamped confirmation. Export .json gives you a portable copy of every input, offer and report header, and Import .json reads it back. Export CSV produces the amortisation schedule for a spreadsheet. Reset asks twice, then clears memory and every local storage key this tool uses.

References

The formulas and rate conventions in this tool were checked against the following sources.

1. European Union (2008). Directive 2008/48/EC on credit agreements for consumers — Article 3 (definitions of the total cost of the credit and the annual percentage rate of charge), Article 19 and Annex I Part I (the basic equation equating the present value of drawdowns to the present value of repayments and charges). eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32008L0048
2. Consumer Financial Protection Bureau, United States. Regulation Z, 12 CFR §1026.22 — Accuracy of the annual percentage rate (the actuarial method and Appendix J; tolerances of 1/8 of 1 percentage point for regular transactions and 1/4 for irregular transactions). consumerfinance.gov/rules-policy/regulations/1026/22/
3. IFRS Foundation / International Accounting Standards Board (2016, effective 1 January 2019). IFRS 16 Leases — single lessee model, right-of-use asset and lease liability, short-term and low-value exemptions. ifrs.org/issued-standards/list-of-standards/ifrs-16-leases/
4. Sekhon, R. & Bloom, R. Applied Finite Mathematics, §6.4 "Present Value of an Annuity and Installment Payment", Mathematics LibreTexts — derivation of the annuity present value and of the instalment payment. math.libretexts.org/Bookshelves/Applied_Mathematics/Applied_Finite_Mathematics_(Sekhon_and_Bloom)
5. Olivier, J. Business Mathematics, §12.4 "Leases", Mathematics LibreTexts — leases as annuities due, the (1 + i) adjustment for beginning-of-period payments, and the role of the residual value in reducing the amount that must be amortised. math.libretexts.org/Bookshelves/Applied_Mathematics/Business_Math_(Olivier)

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