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Working Capital Loan Calculator

See the cost of short-term working capital.

How it is calculated

The tool uses simple interest charged on the full amount for the whole term: interest = amount × annual_rate ÷ 100 × months ÷ 12. Then total repayment = amount + interest and monthly payment = total repayment ÷ months. The amount is in dollars, the rate is a yearly percentage (12 means 12%), and the term is in months and must be above zero. A negative amount or a negative rate gives no result; a zero rate is allowed and returns the amount split evenly. Interest is never compounded, and it does not fall as you repay, because the balance is treated as outstanding to the end. Origination fees, factor rates, daily or weekly repayment schedules and other lender charges are not included, so the total repayment is a lower bound for loans that add fees, and the true APR can be higher.

Worked example

A business borrows $50,000 for 6 months at 12% a year. Interest is 50,000 × 12% × 6 ÷ 12 = 3,000. Total repayment is 50,000 + 3,000 = 53,000. Spread over 6 months, the payment is 53,000 ÷ 6 = 8,833.33 a month. The tool prints interest of $3,000.00, a total repayment of $53,000.00 and a monthly payment of $8,833.33. Because the balance shrinks with each payment in reality, the effective yearly cost is higher than the stated 12%.

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Common mistakes

  • Treating the stated rate as the true cost. Interest here is charged on the full amount for the whole term while you repay in instalments, so the effective annual rate is above 12%, and lender fees add more.
  • Entering the term in years. The field is months, so a one-year loan is 12, not 1; entering 1 gives only one month of interest ($500.00 on this loan) repaid in a single payment.
  • Typing the rate as a decimal. Enter 12 for 12%; 0.12 is read as 0.12% and cuts the interest to $30.00.
  • Entering a factor rate such as 1.15 as the annual rate. A factor rate is a fixed multiple of the amount, not a yearly percentage, and gives a different result.
  • Entering a negative rate to model a discount or rebate. The tool shows no result for a negative rate.

About this calculator

A working capital loan is short-term financing businesses use to bridge a gap in cash flow — covering payroll, buying inventory ahead of a busy season, or getting through a slow month — rather than funding a long-term asset. These loans are commonly structured with simple interest: interest = principal × rate × time, calculated once over the loan's short term rather than compounding.

Because the loan is short-term, even a modest-looking interest rate can translate into a meaningful cost once fees are added in, so business owners need to see the real total before committing.

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