Business Loan Feasibility Tool
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Business Loan Feasibility Tool
This tool is designed to help you assess the feasibility of taking a business loan by estimating qualification likelihood, potential return on investment (ROI), and the break-even point for your loan-funded investment. It’s a practical resource to guide your funding decisions and ensure alignment with your financial goals.
Please note: The results are based on the information you provide and are intended to serve as general estimates. They do not guarantee loan approval, specific terms, or financial outcomes. For tailored advice, we encourage you to contact us or consult a financial professional.
Instructions for Using the Business Loan Feasibility Tool
How to Fill Out the Form
Loan Amount ($):
Enter the total amount of the loan you’re considering.
Example: If you need $50,000, type 50000.
Interest Rate (%):
Enter the annual interest rate offered for the loan.
Example: If the rate is 7%, type 7.
Loan Term (Years):
Enter the number of years you’ll take to repay the loan.
Example: For a 5-year loan, type 5.
Additional Loan Fees ($):
Enter any fees associated with the loan, such as origination or documentation fees.
Example: If there’s a $500 fee, type 500.
Monthly Revenue ($):
Enter the average total revenue your business generates each month.
Example: If your monthly revenue is $20,000, type 20000.
Monthly Expenses ($):
Enter the total expenses your business incurs each month, excluding current debt payments.
Example: If your expenses are $15,000, type 15000.
Current Debt Payments ($):
Enter the total amount your business pays each month for existing loans or debts.
Example: If you’re paying $2,000 in debt payments, type 2000.
Expected Monthly Revenue Increase ($):
Estimate how much additional revenue the loan will help your business generate each month.
Example: If you expect a $5,000 increase in revenue, type 5000.
Expected Monthly Cost Savings ($):
Estimate how much the loan will save your business each month (e.g., reducing costs by buying equipment or consolidating debt).
Example: If the loan will save $1,000 monthly, type 1000.
Click "Calculate Feasibility":
Once all fields are filled out, click the button to view the results.
Explanation of the Results
1. Loan Qualification
What it Means:
This shows whether you’re likely to qualify for the loan based on your debt-to-income (DTI) ratio.
Green (Likely Qualified): DTI is under 30%. You have a strong chance of approval.
Yellow (Potentially Qualified): DTI is between 30% and 50%. Approval is possible but may require additional documentation or collateral.
Red (Unlikely Qualified): DTI is over 50%. Approval is unlikely unless significant changes are made to finances.
2. Monthly Payment
What it Means:
This is the amount you’ll need to pay each month to repay the loan.
Includes principal, interest, and fees spread over the loan term.
Helps you determine if the payment is manageable within your current budget.
3. Total Loan Cost (Including Fees)
What it Means:
This is the total amount you’ll pay over the life of the loan, including interest and fees.
Helps you understand the long-term financial impact of the loan.
4. ROI (Return on Investment)
What it Means:
The ROI is a percentage that shows the profitability of taking the loan.
Positive ROI: The loan is a worthwhile investment, as the gains outweigh the costs.
Negative ROI: The loan may not be financially beneficial.
5. Break-Even Point
What it Means:
The break-even point is how many months it will take for the loan-funded investment to pay for itself.
Shorter Break-Even Time: Indicates the loan is quickly generating positive returns.
Longer Break-Even Time: May be acceptable for long-term investments but should align with your business goals.
Tips for Interpreting the Results
If Qualification is "Red": Review your debt-to-income ratio and consider applying for a smaller loan or improving your business finances before applying.
If ROI is Low or Negative: Reassess the loan's purpose or look for alternative funding sources with lower costs.
Break-Even Longer Than Loan Term: This indicates the loan might not generate sufficient returns within the repayment period.
This tool is designed to help you make informed decisions about financing. If you need additional guidance, consider consulting a financial advisor.
Disclaimer:
This tool is for informational purposes only and should not be construed as financial, legal, or tax advice. The calculations are estimates and may differ from actual loan terms or outcomes. We strongly recommend consulting with a qualified financial advisor or lender to evaluate your unique situation and ensure accurate planning.