Can my e-commerce business handle the loan installment?
You find out by comparing the installment with the contribution left from your sales each month: if the installment can be paid from the cash left after current expenses, or the extra sales the loan brings cover it, the burden is manageable. To see this, first calculate the installment, then the number of extra orders needed to cover it.
Extra orders to cover the installment = Monthly installment ÷ Contribution per order
You can find the contribution in the break-even point calculator. For the general framework on investment decisions, also see the article is capital needed for e-commerce.
Which formula is the monthly installment calculated with?
In equal-installment loans, the installment is found by dividing the principal into equal parts according to the monthly rate and term; each installment includes both interest and principal.
Installment = Principal × i ÷ (1 − (1 + i)−n)
i is the monthly rate including taxes, and n is the term in months. If tax is added to the interest, the effective rate is: i = Monthly interest × (1 + tax rate).
What does extending the term gain the business, and what does it cost?
As the term gets longer, the monthly installment falls and cash flow eases; in return, total interest rises noticeably. Compare the same example loan at different terms (3% monthly, no tax):
| Term | Monthly installment | Total repayment | Total interest |
|---|---|---|---|
| 6 months | 55.379,25 ₺ | 332.275,50 ₺ | 32.275,50 ₺ |
| 12 months | 30.138,63 ₺ | 361.663,51 ₺ | 61.663,51 ₺ |
| 18 months | 21.812,61 ₺ | 392.626,96 ₺ | 92.626,96 ₺ |
| 24 months | 17.714,22 ₺ | 425.141,39 ₺ | 125.141,39 ₺ |
For an inventory loan, it makes sense to keep the term close to the time it takes the product to sell and turn into cash: if a seasonal product sells in three months, a two-year term means paying interest on already-sold stock for months.
What should I look at when comparing loan offers?
Look not only at the interest rate but at the total repayment including taxes and fees; an offer with a low rate but high costs can be more expensive overall.
- Taxes. On personal loans, KKDF and BSMV are added to the interest; commercial loans are treated differently. The advertised rate is often before tax. Enter the rates in the offer into the tax field; verify current rates with your bank and your accountant.
- Fees. Add amounts such as allocation, file and insurance fees to the “Allocation and other fees” field.
- Annual compound cost. Multiplying the monthly rate by 12 understates the cost. A 3% monthly rate compounds to about 42.6% a year.
- Early repayment. In the first months most of the installment is interest; savings are highest if an extra payment is made early in the term.
Loan or my own cash: which should I grow with?
If the extra profit the loan will bring is higher than its total cost, growing with debt makes sense; if not, growing more slowly with your own cash is safer. To decide, put two figures side by side: the contribution the loan-funded work will leave over the term, and the “Total interest and tax” in the tool.
The ₺300,000 inventory in the example brings ₺61,664 in interest cost over 12 months. If this stock is sold with a contribution of ₺150 per order, about 412 orders are needed just to cover the interest. If you aren't sure you'll sell more than that, consider reducing the amount or shortening the term. The article things to watch out for in capital-free e-commerce can also guide you for starting with little capital.
Updated: · Calculations are for information only; consult your accountant for official transactions.