# Find The Mechanism Behind The Small Business Loan Calculator Periodic interest rate calculation

Step 1

You can find the periodic interest rate by using below formulae

Period interest rate payment =

Annual interest rate of the business loan / no of payments per year

For instance if we take 6.78 as your annual business loan interest rate , then dividing this interest rate by 12 would result in 0.565.

Step 2

To make this percentage into decimal, divide 0.565 by 100. It will give you 0.00565. Now adding 1 to the 0.00565 would result in 1.00565.

If you are not so smart to deal with the figures you can simply make use of small business loan calculator to computer the parameters.

Step 3

Compute the total number of payments

Calculating the total number of payments your business need to make to pay off the principle + interest can be done easily by multiplying the number of payments you need to make by the total number of years. For example if you are going to apply for 20 year loan then total number of payment you will be required to make over the life time is 12 * 20= 240

Now to continue the net step you can make use of the loan calculators or simple scientific calculators.

Step 4

Now raise the periodic interest rate payment to the Tth Power. Here T represents the total numbers of payments you need to make over the long tenure of business life time. In our case it is 240.

So 1.00565 raises to 240 would result in 3.86585807

Step 5

Now deduct the 1 from the resultant figure of step 5

3.86585807 – 1 =  2. 86585807

Step 6

Now divide the periodic loan interest rate by the resultant figure we have got from step 5

In our case

0.00565 / 2. 86585807 would result in

0.00197148632695547271118000620317

Now add the periodic loan interest rate with the result we have got from step 6. Take this figure and multiply it by the total business loan amount

Continuing with our example now add 0.00565 to 0.00197148632695547271118000620317 it will result in 0.00762148632695547271118000620317.

Step 7

If you are planning to get your business loan for \$450,000 to find out the monthly payment multiply the loan amount with the figure we have got from step 6

i.e.,          450,000 * 0.00762148632695547271118000620317 which equals

3429.6688471299627200310027914257. So you need to pay \$3429.66 as

your monthly payment for this loan.

Remember it is only the amount you are paying as interest you need to make repayment of the principal amount too. You can simply calculate the monthly payment of all business loan either using business loans calculator or in your own. You can find the loans calculator in any lender website. Determine how much you can afford to pay each month and take the further step.