Introduction
A Business Loan is a kind of financing offered by banks and NBFCs to meet your business needs. These loans can be utilized to meet your working capital needs, to purchase and acquire assets and raw materials, and to expand your current business.
Business loans of Rs. 50,000 to Rs. 100 crores are available for eligible businesses. These loans are repaid in equated monthly installments or EMIs. They come with a repayment tenure range of 3 months to 7 years.
It is important to plan your business loans based on your business needs and repayment capability. Defaulting on these loans has an adverse effect on your credit score and future loan eligibility.
All the banks and NBFCs lending business loans have a emi calculator for business loan to guide the borrower on the approximate EMI that he may have to pay based on the loan amount and the expected interest rate.
Before you take a business loan, it is ideal to know about the amount of EMI you are going to pay every month. A business loan EMI calculator simplifies this process. All you have to do is to enter the tenure, rate of interest, and total loan amount. Then, the EMI amount gets calculated instantly.
What Is A Business Loan EMI?
The business loan EMI or the equated monthly installment is the monthly repayment you make to the business loan issuer. It can be broken into two parts - a part of the principal amount borrowed and the accrued interest. The accrued interest is computed on the interest rate that is quoted at the time of loan disbursal.
Types of Business Loan Interest Rates
There are two types of Business Loan Interest Rates:
- Diminishing Rate
A diminishing rate or a reducing balance rate is levied every month on the balance loan amount. In this method, the amount on which the interest is calculated reduces every month. The below formula is used to calculate the interest:
Interest payable per EMI = Interest Rate per EMI X Remaining loan amount
This reduces the burden on the borrower with regards to the interest compound of the EMI. This also allows for faster repayment of the loan. - Flat Rate
In a Flat Rate Interest method, the interest component of the EMI is constant until the end of the repayment tenure. It is calculated on the total loan amount and the total repayment tenure. The EMI is not reduced in this case, and the borrower repays till the end of the tenure. The Flat Rate interest rate is calculated by this formula:
Interest Payable per EMI = (Original loan amount × Number of Years × Interest Rate per annum) / Number of Payments
Thus, your monthly EMI is calculated based on the following:
- Type of interest rate applied
- The actual interest rate on your loan
- Repayment tenure
- Total loan amount
What Is A Business Loan EMI Calculator?
A Business Loan EMI Calculator is an online tool that enables you to compute the approximate EMI you can expect on your Business Loan.
Most banks and financial lenders have a Business Loan EMI Calculator on their official website or mobile app. An EMI calculator needs you to enter the loan amount, the repayment tenure, and the tentative interest rate to compute the monthly EMI you will have to pay. This amount will not involve any charges or taxes that might be levied on your EMI.
How Is The Business Loan EMI Calculated?
The business loan EMI is computed based on your loan amount, the interest rate quoted at the time of disbursal, and the total tenure of the loan. By using an online business loan EMI calculator, you can arrive at a rational figure for your total monthly EMI. It can help you decide on the loan tenure and the loan amount beforehand.
Steps To Use The Business Loan EMI Calculator
Here are the steps to use the business loan EMI calculator:
- Use the slider to select the total loan amount.
- Select the duration for the loan.
- Enter the interest rate that suits your current business profile.
- After you hit the submit button, your EMI amount is generated.
What Are the Factors That Influence Business Loan EMI?
The following are the factors that affect the computation of business loan EMI:
- Loan Amount: It is the base factor for computing the monthly loan EMI amount. When the loan amount increases, the EMI amount also tends to increase proportionally.
- Rate of Interest: The rate of interest is based on your income, credit score, the financial statement of the business, and repayment capability.
- Duration of the loan: The tenure of the loan has the maximum impact on the EMI amount. It is the time taken to repay the loan amount completely including interest. When the tenure increases, it will result in low EMI amounts.
The Benefits of a Business Loan EMI Calculator
The key benefits of using a business loan EMI calculator are:
- Avoid cumbersome calculations: Manual calculations are tedious to make. When you use a business loan EMI calculator, you can just enter a few details and click the enter key. You will get the results.
- Evaluate multiple options: The EMI calculator enables you to change the input values to arrive at a suitable combination of loan amount and repayment tenure. If you find the EMI amount to be very high, you can alter the loan amount and tenure to find the best EMI amount that will suit your needs.
- Visualization benefits: Most business loan EMI calculators in India show you your payments in a visual format using pie charts and diagrams.
- Useful for financial planning: If you know the monthly payment for an EMI and the total interest amount you are paying, planning out your finances and making other financial decisions will be easier.
- Accurate calculations: The best way to avoid calculation mistakes is to use a calculator particularly for this purpose.
- Determines the business loan criteria: You can check the monthly loan amount through a business loan EMI calculator and also whether your business has the capacity to repay it.
What Affects Business Loan EMI and How To Reduce It?
The estimated business loan EMI amount may be too high for you. In that case, it is important to know what affects your EMI. The major factors include:
- Rate of Interest: Explore all possible interest rates from various institutions.
- Type of Interest Rate: Choose between diminishing and flat rates based on your financial situation.
- Loan Tenure: Adjusting the tenure can help balance EMI and interest costs.
- Loan Amount: Determine an appropriate principal loan amount using the EMI calculator to suit your needs.
Conclusion
Understanding Business Loan EMIs and their calculations is essential for effective financial planning and decision-making. A well-planned business loan not only meets your financial needs but also ensures that you can manage repayments comfortably without straining your business operations. Using a Business Loan EMI Calculator simplifies this process, helping you evaluate various loan options and choose the one that best fits your requirements. By considering factors like the loan amount, interest rate, and repayment tenure, you can make informed decisions to minimize costs and ensure the financial stability of your business. Properly managing your EMIs is a step toward sustainable growth and achieving your business goals.
