Every standard business loan payment comes out of one formula. If you can run it once by hand, you can check any lender’s quote, any calculator, and any spreadsheet — and spot the two common errors that make payments come out wrong. This page works the formula step by step on a real example, then shows the spreadsheet shortcut and the two pricing shapes (factor-rate and precomputed simple-interest) that the formula does not describe. When you just want the number, the business loan calculator runs the same math instantly.
General information, not financial advice.
For an amortizing loan with monthly payments:
M = P × [r(1 + r)^n] ÷ [(1 + r)^n − 1]
The loan: $50,000 at 10% APR over 60 months, no down payment.
(BluLoans publishes the same loan at $1,062.35 a month and about $13,741 of interest — the figures agree.) To see the payment broken into its interest and principal pieces month by month, generate the schedule with the business loan amortization calculator — how the interest is computed each month is covered in how business loan interest is calculated.
Excel and Google Sheets run the identical formula through the PMT function:
=PMT(rate per period, number of periods, present value)
For the same loan: =PMT(0.10/12, 60, -50000) returns $1,062.35. Watch the sign convention: PMT returns a negative number when the loan amount is entered as a positive value, because the spreadsheet treats the payment as money leaving you. Entering the principal as −50000 (or putting a minus sign in front of the whole function) flips the result positive. Divide the annual rate by 12 and use the term in months, exactly as in the hand formula — mixing annual rates with monthly periods is the most common spreadsheet error.
Two common products are not priced by amortization, and forcing them through the formula produces nonsense:
Weekly payments are the one variation the formula handles with a small change: divide the annual rate by 52 instead of 12, and let n be the number of weeks. Everything else works the same way.
The hand calculation earns its keep when a quote lands. Run the formula on the amount financed, the note rate and the term in the offer; if your result and the lender’s payment differ, the gap has a cause, and it is almost always one of three things: the lender has financed fees into the balance (so P is larger than the amount you asked for), the payment includes escrowed insurance or taxes on a secured loan, or the quote is not an amortizing payment at all but a factor-rate or precomputed figure wearing a rate’s clothing. Each cause is visible once you know your own number — which is the whole point of being able to produce it.
What is the formula for calculating a loan payment? M = P × [r(1 + r)^n] ÷ [(1 + r)^n − 1], where P is the amount financed, r is the APR divided by 12, and n is the term in months — the formula Crestmont’s by-hand guide is built around. On $50,000 at 10% APR for 60 months it gives $1,062.35 a month, $13,741.13 of interest in total.
How do you calculate a business loan payment by hand? Convert the APR to a monthly decimal (APR ÷ 12), raise (1 + r) to the power of the number of payments, and work the bracket [r(1 + r)^n] ÷ [(1 + r)^n − 1] before multiplying by the principal. Every intermediate value for a $50,000, 10%, 60-month loan is shown in the worked example above; in a spreadsheet, =PMT(0.10/12, 60, -50000) returns the same $1,062.35.
How are payments calculated on a factor-rate loan? There is no interest formula: multiply the amount funded by the factor rate to get the total repayment, then divide by the number of payments (Crestmont’s factor-rate passage describes the same total-repayment method). $50,000 at a 1.25 factor over 12 months is $62,500 ÷ 12 = $5,208.33 a month — and unlike an amortizing loan, repaying early does not reduce the $12,500 cost.
Sources: Crestmont Capital, business loan payment guide (formula, by-hand method, factor-rate totals); Aspire, step-by-step loan payment calculation; BluLoans, published $50,000 loan figures (cross-check). Currency verified 2026-10-23.