How to Calculate ROI – Making Your Small Business Loan Count

How to Calculate ROI – Making Your Small Business Loan Count
Dustin Clendenen
on April 24, 2017
Read in 3 min

Here’s a controversial thought:

Not all debt is bad debt.

Since not all of us are independently wealthy or particularly good at fundraising, business loans are a great way to quickly and easily get working capital so you can work on your goal.

How to Calculate ROI & Why Business Loans Shouldn’t Be Viewed As “Bad Debt”

There’s an old saying that in order to make money, you have to spend money.

But if you don’t have money to spend or the ability (or desire) to bring in investors, the only other option is to take on some debt.

The idea of debt might be utterly terrifying, but keep in mind that even successful, well established companies utilize business loans in order to expand.

If you know how to calculate ROI on a major expenditure, you can easily apply the same logic to financing.

Expressed as a percentage, ROI is equal to the benefit (or return) of an investment divided by the total cost.

For Matt Ham, President & Owner of Computer Repair Doctor, taking out a business loan to grow his company was a no-brainer.

“Frankly, the idea was pretty simple.

We operate a few stores and we’d had success with each store individually.” he said.

“Looking at our business model, it seemed that the best way to grow was by increasing our footprint and opening more stores in new locations to multiply our success.

Using loans, we were able to open new stores and start growing those locations into the same levels of success that we saw with our original locations.”

If you already have a successful and established business model to follow with a reasonable expectation of how following it will affect profit and cashflow, taking out a business loan to expand could practically be risk-free.

How to Calculate ROI – Why Business Loans Can Actually Be A Great Investment

Even if you don’t have a tried-and-true business model to follow based on your own experience, taking out a business loan might be the only way to get your venture off the ground.

Just be prepared to work for it.

“I could not have started my business without a business loan,” says Michelle Griffith, former firefighter and now owner of Firehouse Grilling Co., a Cleveland-based food truck concept run out of a converted fire-engine.

The unusual concept, not to mention the calculated risk of taking out a business loan, paid off in a big way.

“We started running the food truck in June of 2016, [and needed to take out a starter] loan for $60,000,” Griffith explained.

“Because food trucking is a seasonal business, we didn’t run the truck in the winter. [But] in less than five months my revenue was $168,000! Not a bad ROI!”

Learn more about Small Business Loans for Women

How to Calculate ROI – Small Business Loans Help You Hold On To Equity

Taking on debt can always be risky, but as long as you can pay it off, it keeps you in full ownership of your business.

“When we launched our business two years ago we had no money and no outside capital to get started with,” explains Bryan Clayton CEO of GreenPal, an app that acts as ‘the Uber of lawn care.’ 

Like most tech startups, they went on the fundraising circuit talking to angel investors and venture capitalists begging for money to get started.

He said, “However, our vision was just too broad in scope and we got turned down and told ‘no’ over 40 times.”

“I was fortunate enough to have solid personal credit, and this enabled my team to secure an unsecured line of credit for $85,000 to get our business started,” Clayton explained.

“We went this route versus a credit card because we could only secure $25,000 on a credit card and we needed $80 – $90,000 to fund our first six months and get our beta version of our app built.

We paid that off in the first year, and this year we’re going to surpass $3 million in annual revenue.

Good thing early investors told us ‘no’ because with their capital they would have owned and controlled 30% of our business.

Because we are self-funded, my cofounders and I own it all.”

Learn more about The Way Banks View Your Small Business

How to Calculate ROI On Your Small Business Loan

There are many factors that determine how to calculate your ROI, ranging from your confidence in your endeavor to your ability to secure low interest loans.

Taking out a business loan from a lender need not be as nail-biting form of getting capital as you think, however.

Because ultimately, what will your ROI be if you fail to start or grow your business with the capital needed to do so?

See Business Lenders
Dustin Clendenen Finance Journalist

Dustin Clendenen is an LA-based screenwriter, editor, and all-around storyteller.

He spends most of his time thinking about the “Big Picture” and obsessing over its details.

Follow his musings on Twitter.

Recommended for Business Loans
Headway Capital

Important Disclosures. Please Read Carefully.

Persons facing serious financial difficulties should consider other alternatives or should seek out professional financial advice. This website is not an offer to lend. is not a lender or lending partner and does not make loan or credit decisions. connects interested persons with a lender or lending partner from its network of approved lenders and lending partners. does not control and is not responsible for the actions or inactions of any lender or lending partner, is not an agent, representative or broker of any lender or lending partner, and does not endorse any lender or lending partner. receives compensation from its lenders and lending partners, often based on a ping-tree model similar to Google AdWords where the highest available bidder is connected to the consumer. Regardless,’s service is always free to you. This service is not available in all states. If you request to connect with a lender or lending partner in a particular state where such loans are prohibited, or in a location where does not have an available lender or lending partner, you will not be connected to a lender or lending partner. You are urged to read and understand the terms of any loan offered by any lender or lending partner, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you. By submitting your information via this website, you are authorizing and/or lenders and lending partners in its network or other intermediaries to do a credit check, which may include verifying your social security number, driver license number or other identification, and a review of your creditworthiness. Credit checks are usually performed by one of the major credit bureaus such as Experian, Equifax and Trans Union, but also may include alternative credit bureaus such as Teletrack, DP Bureau or others. You also authorize to share your information and credit history with its network of approved lenders and lending partners. For qualified consumers, our lenders offer loans with an Annual Percentage Rate (APR) of 35.99% and below. For qualified consumers, the maximum APR (including the interest rates plus fees and other costs) is 35.99%. All loans are subject to the lender’s approval based on its own unique underwriting criteria. Example: Loan Amount: $4,300.00, Annual Percentage Rate: 35.99%. Number of Monthly Payments: 30. Monthly Payment Amount: $219.36. Total Amount Payable: $6,581.78 Loans include a minimum repayment plan of 12 months and a maximum repayment plan of 30 months. In some cases, you may be given the option of obtaining a loan from a tribal lender. Tribal lenders are subject to tribal and certain federal laws while being immune from state law including usury caps. If you are connected to a tribal lender, please understand that the tribal lender’s rates and fees may be higher than state-licensed lenders. Additionally, tribal lenders may require you to agree to resolve any disputes in a tribal jurisdiction. You are urged to read and understand the terms of any loan offered by any lender, whether tribal or state-licensed, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you.

Lender’s or Lending Partner’s Disclosure of Terms.

The lenders and lending partners you are connected to will provide documents that contain all fees and rate information pertaining to the loan being offered, including any potential fees for late-payments and the rules under which you may be allowed (if permitted by applicable law) to refinance, renew or rollover your loan. Loan fees and interest rates are determined solely by the lender or lending partner based on the lender’s or lending partner’s internal policies, underwriting criteria and applicable law. has no knowledge of or control over the loan terms offered by a lender and lending partner. You are urged to read and understand the terms of any loan offered by any lenders and lending partners and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you.

Late Payments Hurt Your Credit Score

Please be aware that missing a payment or making a late payment can negatively impact your credit score. To protect yourself and your credit history, make sure you only accept loan terms that you can afford to repay. If you cannot make a payment on time, you should contact your lenders and lending partners immediately and discuss how to handle late payments.