Whether you’re launching a startup, seeking new investment opportunities, or expanding operations, business loans can provide quick access to the funds necessary for growth.
What Is a Business Loan EMI?
When you take out a business loan, the lender charges interest on the loan amount, which must be repaid over an agreed-upon period. The business loan EMI refers to the fixed amount you pay back each month, which includes both the principal and interest until the loan is repaid in full.
Factors That Affect Your Business Loan EMI
When calculating business loan EMI, some common factors taken into account are as follows:
- Principal Loan Amount – A higher principal loan amount results in higher EMIs. The more you borrow, the larger your monthly repayments will be.
- Interest Rate – The interest rate, set by the lender, directly impacts the EMI amount. Higher interest rates lead to higher EMIs. Interest rates vary among lenders and are influenced by factors such as your age, credit score, annual turnover, nature of business, business vintage, and the lender’s policies at the time of loan application.
- Loan Tenure – The duration of your loan impacts the EMI. A longer repayment period will result in smaller EMIs but leads to higher interest costs, whereas a shorter tenure increases the EMIs but reduces the total interest paid.
In addition to the EMI, your financial planning should consider other fees and charges, such as processing fees, that can impact the overall loan cost. Always seek reputable lenders, such as SMFG India Credit, that clearly mention the costs associated with business loans on their website.
How to Calculate Business Loan EMI?
There are 2 primary ways to calculate your business loan EMI – using the EMI calculation formula and using a business loan EMI calculator. Let’s explore each method.
Using an EMI Calculation Formula
The mathematical formula to calculate business loan EMI is:
EMI = P x R x (1 + R)^n / ((1 + R)^ n-1)
where,
P = principal amount
R = monthly interest rate (annual interest rate divided by 12)
n = repayment period in months
Let’s say that you take out a business loan of INR 30 lakhs at an interest rate of 13% per annum with a repayment period of 48 months. Using the above formula, the EMI turns out to be approximately INR 80,482.
Using a Business Loan EMI Calculator
To save the time and effort involved in manual calculations, you can use an online EMI calculator to quickly estimate your monthly payments.
Here’s how you can use the free business loan EMI calculator provided by SMFG India Credit and get your result in seconds:
1. Access the Calculator – Click here to access the business loan EMI calculator and get started.
2. Enter the Loan Amount – Enter the total loan amount you wish to borrow for your business.
3. Select the Interest Rate – Use the slider to select an interest rate. Keep in mind that this is an estimate and the final interest rate will be at the discretion of the lending institution.
4. Enter the Loan Tenure – Select a loan tenure that works for you, ranging between 12 to 48 months.
5. Calculate Business Loan EMI – Once you enter the information, the calculator will provide your business loan EMI in seconds.
Important Note:
EMI Calculators give you an estimated figure. Please note that the actual EMI amount may differ based on the lender’s policies at the time of evaluating the loan application. The calculator results should not be considered a substitute for professional advice or loan sanction.
Tips for Effective Financial Planning Using a Business Loan EMI Calculator
A business loan EMI calculator can be a valuable tool for financial planning. Here are some tips on how to use it effectively:
Experiment with Different Scenarios
Use the calculator to experiment with different loan amounts, interest rates, and tenures to see get a realistic picture of your business loan EMIs. This can help you estimate the most manageable repayment plan for your cash flow.
Consider the Total Loan Cost
Factor in any charges and fees associated with the loan, such as processing fees, prepayment penalties, late fees, etc.
Assess Affordability
Consider your existing expenses to determine how much EMI you can comfortably afford without straining your business cash flow. Aim to keep aside funds for unexpected expenses or fluctuations in income.
Monitor Cash Flow Regularly
Keep track of your cash flow regularly to ensure you can meet your EMI and other financial obligations. Adjust your budget as necessary to accommodate any changes in income or expenses.
Conclusion
Business loans are a viable solution to help your company grow, giving you the funds needed to start new projects, support daily operations, or invest in lucrative opportunities. By using a business loan EMI calculator, you can foresee how the loan may impact your cash flow and plan accordingly to ensure the repayments fit your budget. With careful planning and regular checks on your finances, you can use business loans to support your growth while maintaining a stable financial position.
*EMI calculators only tell you an estimated figure. Your actual EMI, interest rate, and other loan terms will depend on your eligibility and the lender’s policy at the time of the loan
application.
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