A commercial term loan is a lump sum paid back in equal monthly payments over a set number of months; each payment covers that month's interest and pays down part of the balance. Below, an invented machinery repair shop in Jerome, ID follows one equipment package through a term loan: how its payments split over time, one loan against two, and four term lengths side by side.
An invented repair shop borrows $17,155 for an engine-drive welder and a diagnostic laptop at an 11.74% annual rate. Over 48 invented months the payment is $449.57; two separate loans of 60 and 24 months start higher and drop to $281.72 after month 24.
What a Commercial Term Loan Is and How Each Payment Splits
Commercial and industrial machinery and equipment repair and maintenance (NAICS 811310) counted 8 employer establishments in Jerome County, ID in 2023, 6 of them with fewer than five employees (County Business Patterns).
An invented field repair shop wants an engine-drive welder at $12,740 and a diagnostic laptop with hydraulic software at $4,415. On a term loan of $17,155 at an 11.74% annual rate over 48 months, every invented payment is $449.57, and the 48 payments total $21,579.36.
| Payment number | Interest | Principal | Balance after the payment |
|---|---|---|---|
| 1 | $167.83 | $281.74 | $16,873.26 |
| 12 | $135.99 | $313.58 | $13,586.16 |
| 24 | $97.12 | $352.45 | $9,575.05 |
| 36 | $53.45 | $396.12 | $5,066.86 |
Early in this invented loan, $167.83 of the first payment is interest; by payment 36 the interest share has fallen to $53.45, because it is figured on a smaller balance each month.
The first invented interest figure comes from the balance times one month of the rate: $17,155 times 11.74% divided by 12 is $167.83. Whatever is left of the $449.57 payment goes to principal, so each later invented payment puts a little more toward the balance than the one before.
One Loan or Two for Items That Last Different Spans
The invented welder may work for many years, while the laptop may need replacing sooner. The invented shop compares one 48-month loan with two loans at the same 11.74% annual rate: $12,740 for the welder over 60 months at $281.72, and $4,415 for the laptop over 24 months at $207.29.
| Structure | Months 1 to 24 | Months 25 onward | Total interest |
|---|---|---|---|
| One loan, 48 months | $449.57 | $449.57 through month 48 | $4,424.36 |
| Two loans, 60 and 24 months | $489.01 | $281.72 through month 60 | $4,723.16 |
For the first two invented years the pair of loans costs $39.44 more a month than the single loan and $298.80 more in interest overall; in exchange, the laptop is paid off when the shop may want to replace it, and the welder payment runs a year longer at a lower amount. A funding partner decides whether two loans are offered at all.
How Long Commercial Term Loans Run, Shown on the Same Package
Term lengths are set by the funding partner, and equipment costs may also go through equipment financing instead. Here is the same invented $17,155 at an 11.74% annual rate across four terms:
| Term | Monthly payment | Total of payments | Interest |
|---|---|---|---|
| 24 months | $805.46 | $19,331.04 | $2,176.04 |
| 36 months | $567.66 | $20,435.76 | $3,280.76 |
| 48 months | $449.57 | $21,579.36 | $4,424.36 |
| 60 months | $379.35 | $22,761.00 | $5,606.00 |
Each added year lowers the invented payment and raises the interest: 60 months costs $5,606.00 in interest against $2,176.04 at 24 months. Other funding types are laid out on the business loans page.
Paying for the Laptop in Cash and Financing Only the Welder
One more invented option: the shop pays the $4,415 laptop from its account and finances only the $12,740 welder over 48 months at the same rate. The invented welder loan runs $333.87 a month with $3,285.76 of interest, $1,138.60 less than the full package costs over the same 48 months.
Paying part in cash lowers the interest but leaves less in the account for parts and payroll between jobs. The invented owner weighs that against how many weeks of parts orders the cash would otherwise carry.
By Cobblegrove Business Funding · Updated
