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.
Debt-service coverage
Monthly operating cash flow divided by the monthly loan payment, against the 1.25× most Canadian commercial lenders look for.
Coverage if the rate or term changes
How coverage changes if the rate is one point lower to three points higher, or you choose a term from 1 to 15 years.
What borrowing costs after tax
Interest and the up-front origination fee, less the tax they save when deducted from business income.
Where each year's payments go
Each bar is one loan year, split into principal repaid and interest. The interest part shrinks as the balance falls.
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 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 1.25 bar is a lending convention, not a legal limit. The tile, dial and grid show the ratio to two decimals, cut rather than rounded, so 0.999 reads 0.99× and 1.249 reads 1.24×: a ratio is never shown as meeting a bar it misses. The dial ends at 3×; a higher ratio sits at the end with its exact value printed in the middle (a ratio of 10,000 or more prints as 10,000×+).
If the rate or term changes
Each cell of the coverage grid reruns the payment formula above at that rate and term, keeping your loan amount and cash flow, and divides the cash flow by the new payment, so the outlined cell is your DSCR. Rows run from one point below your rate to three points above it, because the rate you are offered can differ from the one you planned on, and a floating-rate loan (including a CSBFP loan priced at up to prime + 3%) reprices whenever prime moves. A longer term always raises coverage because the payment is smaller, but you pay more interest. The sentence under the grid checks every whole-year term up to 40 years for the shortest one that reaches 1.25.
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 as it is paid (Income Tax Act s. 20(1)(c)). At a combined small-business tax rate t, the after-tax interest cost is total interest × (1 − t). A fee paid to arrange the loan is a financing expense, deductible 20% a year over five years, with any remainder deducted in the year the loan is paid off early (s. 20(1)(e)). The after-tax chart applies t to both: after-tax cost = (total interest + fee) × (1 − t). The tax savings are added at face value, not discounted for when they arrive, and they assume the business has enough taxable income to use the deductions. 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.
Where each year's payments go
Each month's interest is the opening balance × r, and the rest of the payment repays principal, so the interest part shrinks every month. Whether interest or principal is the larger part of your first payment depends on the rate and term: on a 5-year loan at 8% the first payment is about one-third interest, while on a 10-year loan at 8% principal only becomes the larger part in month 17. The bars add up the twelve months of each loan year, the same figures as the schedule below.
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 (the grid shows their effect on coverage, not on your payment schedule), prepayment penalties, GST/HST on any fees, or a line of credit's revolving balance. DSCR here covers this loan only: if the business already has loan payments, a lender divides cash flow by all of them. 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.
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.