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Business Loan EMI Calculator

To be able to run a business successfully, one needs large amounts of money. While there are multiple ways to raise capital, the most common form is through getting a business loan. There are multiple organizations that provide business loans in the market. It is pertinent to do proper research about each organization before deciding on one.

Since the amount of money taken out as a business loan is huge and these loans are of risky nature, they come with high interest rates. This in turns adds to the monthly payment that the business has to do. 

To help potential customers decide on taking a business loan from them, organizations have built up Business Loan Calculators for ease. Before we delve into business loan calculators, that let’s clear up some basics.

Loan Amount

1 lac

2 Cr

INR

Tenure

6 Months

36 Months

Months

Interest Rate

1%

21%

%

Principal Amount

Rs.1,00,000


Interest Amount

Rs.291.87


Monthly EMI

Rs.16,715.31

Total Amount Payable:

Rs.1,00,291

What is a Business Loan EMI?

EMI or Equated Monthly Installment refers to the monthly repayments you make to the loan issuer. An EMI usually consists of two parts: the principal amount borrowed and the accrued interest. The accrued interest is calculated on the interest rate that is quoted at the time of loan disbursal.

There is a specific method to calculate EMI. It involves a couple of variables in the whole calculation. EMI calculation is written in the following sections.

What is an EMI Calculator for Business Loan?

When you are deciding on a taking out a business loan, you might have a loan amount in mind and a loan tenure in mind. With that, you could also wonder what your EMIs would look like. Using an online business loan calculator will help you in this case.

Mostly, a business loan EMI calculator uses three main variables to arrive at your estimated EMI amount: loan amount, interest rate and loan tenure. 

For example, if you want to borrow a business loan amount of Rs.1, 00,000 for 2 years at an interest rate of 14%, you enter these variables in the business loan payment calculator, and your EMI amount is shown Rs.4,992 and your total interest will be Rs.19,819. If you wish to see overall how much extra you would have to pay, it will be Rs.1, 19,819.

 

How does a Business Loan EMI Calculator work?

Business loan EMIs are calculated using a very easy formula.

E = P x r x (1+r)n / (1+r) n-1

Here,

  • E = EMI amount
  • P = Principal amount
  • r = Rate of interest at which you will be borrowing the loan
  • n = tenure of the loan over which you will be repaying the loan.

As it can be quite cumbersome to calculate your monthly EMI amount manually using the above formula, businesses have built small business loan calculators. They are online tools that do the calculations for you. All you need to do is enter your loan amount, loan tenure and the interest rate at which you want to borrow, and your EMI with the total interest you have to pay is displayed.

All your hard work is done for you, now you can go about planning on applying for the loan and getting all your documents in order for it.

 

Why Do You Need to Use a Business Loan Calculator EMI?

  • Save yourself from tedious calculations. Gone are the days when you use a paper and pen to figure out how your monthly payments would look like. Enter a few details and click enter. That’s it. All the work has been done for you by business loan calculator India.
  • Visualization benefits: Most business loan EMI calculators in India have a feature where they show you your payments in a visual format using pie charts and diagrams. It has been proven that visual representations are easier to understand than normal written text.
  • Useful for financial planning: Business is risky and there is no way of knowing what will happen. Financial decisions are especially hard because they involve large sums of money and the implications of non-payment for a business loan is not the same as for an individual loan. If you know how much you are paying every month for EMI and what is the total interest amount you are paying, planning out your finances and making other financial decisions will be easier.

What effects EMI and how to lower your EMI?

So you have calculated your estimated EMI amount but maybe it is too high for you and you want to know how to reduce the monthly EMI amount. That is understandable and to know how to reduce your EMIs, it is important to know what effects your EMI. 

When you tweak one or two of the following factors, it will result in your EMI being reduced. The major factor which affect your monthly EMI amount are:

1. Rate of interest: Without any doubt, the rate of interest is very important when it comes to your EMI amount. As stated earlier, your monthly EMI amount involves two major amounts: the principal amount that you are repaying every month and the accrued interest calculated using the rate of interest you are borrowing your loan at.

Rate of interest is a highly competitive factor among banks and financial institutions because lower the interest rate, more will be the customers who come into the bank to take the loan. It is therefore important to explore all possible interest rates from all institutions. After proper research settle on the one that is best for your loan amount. Remember, higher the rate of interest, higher will be your EMI and lower the rate of interest, lower will be your EMI.

2. Loan Tenure: The second major factor that affects your EMI amount is the loan tenure. Loan tenure refers to the time period over which you will be repaying off your entire principle loan amount. Having a longer loan tenure would mean that your principal repayment amount is stretched out over many years and hence it will be lower. But it is also important to keep in mind that your interest will also keep increasing when the tenure keeps increasing.

This is a dicey situation and needs much thought and deliberation. On one hand your principal amount you are repaying every month is reduced over longer loan tenure but your accrued interest also increases. Try out all possible combinations of loan tenure and rate of interest using the business loan calculator to know which is best for you.

3. Loan Amount: Last but not least the loan amount itself is an important factor of EMI calculations. Since the principal loan amount is the base for the EMI calculations, as per the formula stated above, it would make sense to tweak your loan amount a little bit. The higher your loan amount, higher will be your EMI and lower the loan amount, lower the EMI.

As a business, you have different needs that involve a lot of money which is why the loan amount is somewhere you would not want to budge at. This is where the benefits of using an online business loan calculator shine through. Enter the loan amount you want, over the tenure you want and the rate of interest you wish to have, and tweak one or all of these factors to know what amount you are comfortable with.

Business Loan Calculator FAQs:

1. What happens if I miss one EMI payment?

When you miss one EMI payment, all the other EMI payments are adjusted to accommodate the missed payment. All other future EMI payments increase and a late payment fee is also charged.

2. Why is it important to calculate Emi before taking out a business loan?

In order to know what you will be paying every month in terms of the principal amount and the accrued interest amount, EMI calculation is needed. It will help you understand, what you will be potentially paying and you will be able to plan out your payments accordingly.

3. How do I check my eligibility for a business loan?

The eligibility criteria for business loans are quite strict and differ from bank to bank. Most banks have a lower and upper age limit for applicants to get a business loan approved. There is also a need to maintain a minimum turnover over a year or two. You can check up on your eligibility for a business loan online.

4. Will my EMI change in the future or remain the same?

No. The EMI amount does not change once you have locked in on a loan amount, rate of interest and loan tenure. However, the Government can change the rate of interest if they so wish to. In such cases, your EMI amount will change.

5. When is usually EMI due every month?

Your EMI payment date is fixed every month. It is very much like a utility bill that you pay for every month. The date is usually every month from the date since the first loan disbursal to your bank account.

6. What is the mode of repayment of the monthly EMI?

Most banks and financial institutions allow you to repay off your monthly EMIs online through direct debit or electronic clearing service (ECS). Alternatively, you can also choose to pay your EMI through cheques and deposit them at the nearest branch.