This calculator from Glenford Financial, a small-business funding broker in San Angelo, TX, turns an amount, interest rate and term into a monthly payment, total interest and total repaid. The page then shows how to add that payment to fixed costs and divide by gross margin to find break-even sales. The output is illustrative arithmetic only and is not an offer.
What the calculator gives you
The three results are the estimated monthly payment, the total interest over the term and the total repaid. The payment uses the standard amortization formula, so each payment covers that month's interest and part of the principal. Use the note rate from a real offer; the calculator does not know what any lender would charge. Fees, insurance and other costs are not included.
From payment to break-even sales
- Add up fixed monthly costs. Rent, salaries, insurance, utilities, software and any other cost that does not change with sales.
- Add the loan payment from the calculator above.
- Work out your gross margin. The share of each sales dollar left after the direct cost of what you sold. If an item sells for $10 and costs you $4, the margin is 60 percent.
- Divide. Fixed costs plus the payment, divided by the gross margin, equals the monthly sales needed to break even.
A worked example
Hypothetical figures, for illustration only and not based on any offer: a new shop expects fixed costs of $9,000 a month and a loan payment of $1,000 a month, and it keeps 60 cents of every sales dollar after the cost of goods. Break-even sales are ($9,000 + $1,000) / 0.60, or about $16,700 a month. Below that, the business loses money; above it, each extra dollar of sales adds 60 cents toward profit.
Now test it: if margins come in at 50 percent instead, break-even rises to $20,000 a month. Small changes in margin move break-even a lot, which is why lenders ask where the margin assumption comes from.
Small business startup loan requirements
Requirements vary by lender, but startups are commonly asked for a business plan with projections, a personal financial statement, owner investment in the business, personal credit history and, very often, a personal guarantee. Equipment financing can be easier to obtain because the equipment secures it. The business plan guide covers how to present break-even in a plan.
Using the result
If break-even sales look out of reach in the first year, a smaller amount, a longer term, lower fixed costs or more owner investment may change the picture. Compare repayment structures on the term loans page, or browse the other guides and calculators.
By Glenford Financial · Updated