Business Loan & DSCR Calculator
The payment, the true cost once the origination fee is baked in, and the debt-service coverage ratio a Canadian lender checks before saying yes, with the after-tax cost of borrowing and how CSBFP-backed loans compare.
Balance & interest over time
Remaining principal falls as cumulative interest paid climbs. Early payments are mostly interest.
What the loan really costs
Principal repaid, interest, and the up-front origination fee, the total cash that leaves the business.
Amortization schedule
Annual summary: what goes to principal, what goes to interest, and the balance at each year end.
| Year | Payments | Principal | Interest | Balance |
|---|
How this is calculated
The payment
A commercial term loan is a standard amortizing loan compounded monthly: the monthly rate is r = rate ÷ 12 and the payment is P × r ÷ (1 − (1 + r)^−n) where n = years × 12. Unlike a residential mortgage (which Canadian law compounds semi-annually), term loans are quoted and compounded monthly. Total interest is payment × n − principal.
DSCR, the number lenders actually check
Debt-service coverage ratio is your operating cash flow divided by the loan payment. Here it is (monthly revenue − monthly operating expenses) ÷ monthly payment. Most Canadian commercial lenders want 1.25 or higher, comfortable headroom. Between 1.00 and 1.25 is tight and often needs collateral or a personal guarantee; below 1.00 the business can't cover the payment from operations and approval is unlikely. (Sophisticated lenders use EBITDA with add-backs for interest and depreciation; this tool uses a simpler revenue-minus-expenses cash flow, which is conservative.)
The origination fee and effective APR
A fee charged up front means you receive amount − fee in cash but still repay the full loan plus interest. The effective APR is the monthly rate i that makes the present value of your payments equal that net cash, solved by Newton's method, then annualized as i × 12. It is always at or above the quoted rate; the shorter the term, the more a fixed fee stings.
After-tax cost of borrowing
Interest on money borrowed to earn business income is deductible in Canada. At a combined small-business tax rate t, the after-tax interest cost is total interest × (1 − t). The Canadian small-business rate is roughly 9% federal plus a provincial small-business rate (often 0–3.2%), landing near 12% for most incorporated small businesses in 2026.
CSBFP, government-backed small-business loans
The Canada Small Business Financing Program guarantees loans up to $1.15 million for businesses with under $10M in annual revenue (up to $500,000 for equipment/leaseholds, up to $150,000 for working capital or intangibles). Rate ceilings are prime + 3% floating or the residential-mortgage rate + 3% fixed, plus a one-time 2% registration fee that can be financed into the loan, enter it in the origination-fee field to see its effect on your effective APR. Rules confirmed as of July 2026; the program is administered by ISED.
What this doesn't model
Interest-only or balloon structures, floating-rate resets, prepayment penalties, GST/HST on any fees, or a line of credit's revolving balance. For personal or vehicle borrowing see the credit-card payoff, car loan vs lease, and debt payoff plan tools.
Common questions
What is a debt-service coverage ratio (DSCR) and what do Canadian lenders want to see?
DSCR is your operating cash flow divided by your loan payment. This tool uses (monthly revenue − monthly operating expenses) ÷ monthly loan payment. Most Canadian commercial lenders want at least 1.25, meaning $1.25 of cash flow for every $1 of debt payment. Below 1.0 the business cannot cover the payment from operations and approval is unlikely.
How does an origination fee change the effective interest rate on a business loan?
An origination fee is charged up front, so you receive less than the face amount but still repay the full loan plus interest. The effective APR is the rate at which the present value of all your payments equals the net cash you actually received (loan amount minus the fee). A 2% fee on a 5-year 8% loan pushes the effective APR to roughly 8.9%.
What is the Canada Small Business Financing Program (CSBFP)?
The CSBFP is a federal loan-guarantee program that helps small businesses (under $10M in annual revenue) borrow up to $1.15 million from banks and credit unions, of which up to $500,000 can be for equipment and leasehold improvements and up to $150,000 for working capital or intangibles. Lenders may charge up to prime + 3% (floating) or the residential-mortgage rate + 3% (fixed), plus a one-time 2% registration fee that can be financed into the loan.
Is interest on a business loan tax-deductible in Canada?
Yes. Interest on money borrowed to earn business income is generally deductible under the Income Tax Act. At a combined small-business tax rate near 12% (roughly 9% federal plus a provincial small-business rate), every dollar of interest costs you about 88 cents after tax. This calculator shows both the pre-tax and after-tax cost of borrowing.
Does this calculator use monthly or semi-annual compounding?
Commercial term loans in Canada are typically quoted and compounded monthly, unlike residential mortgages which are compounded semi-annually by law. This tool uses standard monthly compounding: the monthly rate is the annual rate divided by 12.