What you need
- The loan amount.
- The yearly interest rate from the lender’s quote.
- The term in months.
- Any upfront fees.
1. Convert to monthly figures
A landscaper borrows $35,000 for a skid steer at 9% for 5 years. Monthly rate r = 0.09 ÷ 12 = 0.0075. Number of payments n = 60.
2. Apply the payment formula
Payment = loan × r ÷ (1 − (1 + r)−n). (1.0075)60 is about 1.5657, so (1 + r)−60 is about 0.6387. $35,000 × 0.0075 = $262.50, divided by (1 − 0.6387) = $726.54 a month.
3. Find the total cost
$726.54 × 60 = $43,592.55 paid back, so $8,592.55 in interest. Add any upfront fees to get the full cost of the money.
4. Test whether the business can carry it
Divide your average monthly profit (before this loan) by the payment. If the business makes $1,600 a month, coverage is $1,600 ÷ $726.54 = 2.2. Below 1.0, the payment would come out of savings. Lenders set their own minimum; ask yours.
5. Compare terms
A 7-year term would lower the payment but raise the interest. Run both before you choose; the lower payment isn’t free.
In a spreadsheet
Payment: =PMT(9%/12, 60, -35000) → 726.54
Total interest: =PMT(9%/12,60,-35000)*60-35000
Coverage: =monthly profit / payment
For fixed-rate loans with equal monthly payments. Variable rates, balloon payments and lines of credit work differently; ask the lender for the full schedule and the APR.
Published by Groundwork Business Advisory. Updated October 19, 2026.