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Business Loan EMI Calculator

Any kind of business activity needs a continuous flow of cash to fund its working capital, day-to-day operations, or expansion in its production facility. Some businesses can have regular cash inflows, while some have lumpy cash inflows. To maintain continuity or growth of an enterprise, the majority of businesses borrow money from either banks or Non-Banking Financial Companies (NBFCs). The money borrowed from financial institutions at reasonable rates is called the Business Loan.
How to Get a Business Loan?

One can obtain a Business Loan in the traditional manner by visiting a bank or NBFC and on submission of relevant documents post meeting eligibility criteria. These institutions disburse the loan amount to your bank account after 10-15 days depending on the requirement. However, if one wants quick Business Loans, one can apply online at Fast mudra.

Our website offers a comparison of interest rates and the processing fees of loans offered by various banks and institutions so that you can get the best terms. The website asks for your basic details and then uses online eligibility calculators to determine your Business Loan eligibility. Post-feeding your personal details, you get a complete list of various Business Loans that suit your requirement along with the basic terms and conditions. Once you select a particular loan proposal out of the various listed proposals, we work with partner banks and coordinate with them throughout the entire loan processing so that you get the best kind of loan suiting your business need quickly and with minimal paperwork.

Types of Business Loans

Secured Loans for Businesses

Loans that are offered against an asset, collateral, or a personal guarantee are known as a secured loan. The lender can easily liquidate such kind of loans if unpaid and money can be recovered. Hence, they are termed secured loans. Typically, working capital loans, inventory loans, term loans, loan against property are termed as secured loans.

Unsecured Loans for Businesses  
Business Loans that are given to a businessperson or self-employed professional without any security or guarantee are termed unsecured loans. There are various situations when a businessperson needs an unsecured loan. Some reasons could be:

Urgent business need that needs funding for a short-term so that he can meet orders and secure payments from customers.  
A customer has not paid on time and as a result, the businessperson needs capital to fund their day-to-day operations for a short period of time.  
Reduction of high interest-bearing loans from friends or moneylenders.  
Here, we will provide information on unsecured loans. For secured loans, please visit our Loan Against Property webpage.

What is Business Loan EMI?

EMI is an abbreviation for Equated Monthly Installment. EMI is the amount a borrower has to pay every month until the tenure of the loan is over. This monthly amount to be paid is a fixed amount that is calculated using the Business EMI calculator that uses three parameters – total loan amount, interest rate and tenure of the loan (time).

What is a Business Loan EMI Calculator?

Business Loan EMI Calculator is a mathematical calculation that determines the amount that a borrower has to pay the lender every month against their Business Loan. For Example: Suppose that you have taken a total loan amount of  1,00,000 for a tenure of 2 years at a rate of 14% per annum. The Business Loan EMI Calculator shall show the EMI to be  4,801.29. So, that till the end of the 24 months tenure, the borrower shall pay  4,801.29*24 =  1,15,230 + loan processing charges as applicable.

The Business Loan EMI calculator is based on the following formula:

Now the calculation for the EMI of this will be:

EMI = P x R x (1+R)^N]/[(1+R)^N-1]


P is the amount borrowed,

R is the interest rate per month (a 14% per annum interest translates to (14/12) % per month), and

N is the number of monthly installments.

In this calculation, the interest amount gets calculated every month afresh since the principal amount gets decreased on each repayment. The split between the interest and the principal value for each equated monthly installment changes during the tenure of the loan. Initially, the split contains a higher component of interest and less of the principal. Gradually, as the months pass, the interest component of the EMI reduces and more principal is prepaid.

Why Do You Need to Calculate EMI for Business Loans?

Businesses revolve around uncertainty and there is no assurance of regular cash flows in a business. Sometimes, a customer pays their dues in a day and sometimes they may pay in a month. As a result, a businessperson needs to have a clear idea of their fixed expenses so that a proper plan is put in place for paying back the loans taken. By Calculating the EMI in advance one can assess one’s payback capability and decide upon the loan amount and tenure accordingly to best manage the finances.

Business Loan Calculator Benefits

Business Loan Calculator that helps you compute your EMI has multiple benefits:

  • Easy and time-saving: The formula for EMI calculation only needs the total loan amount, duration of the loan, and the interest rate. Thus, we can easily compute the EMI thereby save time in evaluating various loan proposals based on EMIs.
  • Accuracy: Manual computation for an EMI may sometimes lead to inaccurate value. The Business Loan EMI Calculator is a mathematical formula that yields fixed output. Hence, you get the accurate and error-free value of EMI.
  • Planning your finances: An accurate idea of the monthly cash forgo can help you plan your finances so that you can service loan easily.
  • Evaluate multiple loans: Business Loan EMI Calculator can help you easily compute EMIs of various loan proposals and help you select one that matches your cash flows.
Part Pre-prepayment in Business Loans

Uncertainty is a part of every business. Sometimes, there is a requirement of cash to fund operational needs or for business expansion. However, there may be times when the market conditions suit your business and you are able to sell more of your products or service and you get to achieve unexpected profits.

In such a scenario, it is generally thought prudent to repay the entire loan or part of the total loan undertaken by the business. We are happy to help you pre-pay the entire loan or part of the Business Loan. In case you opt for part repayment of your Business Loan (also known as pre-payment), the total borrowed amount shall reduce to the extent of pre-payment and interest shall be computed based on the lower principal amount.

You can also opt to reduce the total duration of your Business Loan keeping the EMI constant. We present various scenarios to you post pre-payment and help you choose the one that suits you the most.

Business Loan Eligibility Factors

Banks use multiple factors to evaluate the creditworthiness of a borrower and decide the loan amount eligibility limit for a particular borrower. At Fast Mudra, we use the following parameters to give an estimate about the loan eligibility, amount of loan and interest rate for a borrower:

ParametersBusiness Loan Eligibility Criteria
Eligible Entities
  • Self-employed non-professionals – Sole proprietors, partnership firms, private limited companies, public limited companies involved in the business of manufacturing, trading, and services.
  • Self-employed professionals – Doctors, CA, CS, Architects.
Age21 – 65 years
Loan Amount 50,000 to  100 Crores
Interest Rate13.50% – 21%
Loan TenureUp to 5 years
Business VintageFor self-employed professional – 3 years
 For self-employed businessmen – 5 years
Annual Turnover 1 Crore and above
Banking Stability6 months and above
CIBIL Score750 or above
Other Eligibility ConditionsThe borrower should have a self-owned house or workplace

*The above-mentioned eligibility factors may vary from lender to lender

Eligible Age: Generally, banks consider borrowers between the age of 21 and 65 years as the eligible age for providing Business Loans

Loan Tenure: Since Business Loans are unsecured loans, they are generally given for shorter durations. Commonly, a Business Loan has the tenure of 1 to 5 years. 

Income Tax Returns (ITR): A self-employed person needs to submit Income Tax Return (ITR) of previous 2 years or more to avail Business Loans. Only when a self-employed person has filed regular ITfor the past few years, banks consider them eligible for a Business Loan. Monthly income and repayment capacity of the borrower is computed by the banks based on the ITsubmitted.

Loan Amount: Depending on the requirement of the business, loan amounts of  50,000 to  100 Crores can be sanctioned. Generally, the interest rates for higher loan amounts, if sanctioned, are lower.

Business Vintage and Growth: The growth rate of a business and the quality of the businessperson running the enterprise plays a very important in deciding the eligible loan amount. Banks consider the business stability, its growth rate, and profitability of business over the years as important criteria in deciding loan eligibility. The actual criteria depend on each bank or NBFC but banks generally look for a track record of 5 continuous years of the business and prefer businesses that grow at 15%+ annually with profits for at least past 3 years. Good Business vintage and stable growth provide assurance to banks that the applicant shall repay the loan.

Banking Stability: Banks or NBFCs go through your business bank history in determining the quality of the cash flows and earnings. Banks or NBFCs check your average account balance using your bank’s transactional history to evaluate your banking stability and repayment capacity. They also evaluate your credit score and check whether any of your cheques have any abnormal history.

Revenue/ Turnover: Turnover or Revenue is the income that a business earns from the sale of its products and services. Higher the turnover, larger is the ability of the business to avail a loan. In the case of professionals like doctors, lawyers, this revenue is measured in terms of Gross Annual Receipts. In general, to be eligible for unsecured Business Loans, banks and NBFCs insist for a minimum turnover of  1 Crore. However, at times, NBFCs and banks can provide a Business Loan to a businessperson for a turnover of less than  10 Lakhs depending on the relation of the banker with the loan applicant.

Factors Affecting Business Loan EMI

A Business Loan EMI calculator has the following three parameters that determine the EMI:

  1. Loan Amount (P): This is the total loan amount that the borrower seeks for his business. Higher the borrowed amount, higher is the monthly installment or EMI.
  2. The rate of interest (R): The interest rate is an important determinant of the EMI. This rate depends on your credit history and prevailing market rates and the business environment. Stable businesses generally get a lower rate of interest. Higher the interest rate more is the EMI.
  3. Loan Tenure (N): Any loan that is taken for a longer tenure needs to be repaid over a longer duration and hence the EMI for a long tenure loan is lower than that for a shorter tenure loan. However, for a long duration Business Loan, the total interest that you pay is much higher. Generally, Business Loans have a maximum tenure of 5 years.

Consider an example of a Business Loan for different tenures – 2 years, 3 years, 5 years for a total loan of  1,00,000 with an interest rate of 13.5% per annum. The following table gives you EMIs for various tenures:

Loan Tenure2 years3 years5 years
EMI amount for loan amount  1 lakh at 13.50% 4,778 3,394 2,301
The total amount you pay back to the bank including principal and interest 1.30 Lakhs 1.49 Lakhs 1.94 Lakhs
The interest you have to pay over loan tenure 30,414 48,931 94,227

Thus we can observe the following things from the above table:

Higher the tenure, lower is the EMI. For 5 year loan, the EMI is  2,301 per month v/s  3,394 per month for a 3-year loan at the same interest rate. However, if we look at the total interest amount, for a 5-year loan, we pay  94,227 as interest over 5 years v/s  48,931 as interest over 3 years. For a 2 year loan, the EMI is higher –  4,778. However, the total interest that we pay is the lowest at  30,414 over 2 years. This is less than half the interest that we pay for 5-year Business Loan tenure.

EMI Schedule for a Business Loan

EMI Schedule for a Loan is also termed as Amortization schedule. This Schedule provides a break-up of your EMI of your loan into two parts: Interest Component and Principal Component.

EMI = Interest Component + Principal Component

Since for a Business Loan, generally the EMI is constant throughout the loan tenure, the individual components vary depending on the month of the loan tenure. These components are not the same every month. During the initial days of your Business Loan, the Interest Component is very high because the outstanding loan is high.

However, eventually, during the latter tenure of the loan, the interest component is lower while the principal amount of higher. So, initial EMIs have more interest component in them. This is the reason that when you prepay your loan, you would be surprised to know that you have paid a lot of interest and very less principal and the borrowed portion of the loan is still substantial despite having paid numerous EMIs.

On average, only 17-18% of your loan is repaid in the first year of taking a five year Business Loan. This value is only 50-55% of your Business Loan until the third. Consider that you have taken a 5-year loan of  10 Lakhs and you decide to pre-pay your loan at the end of three years. You will still need to pay back  5,00,000 or more to your bank in spite of having more than half EMIs. Hence, it is very important that one properly understands the amortization table while taking a Business Loan. 

Business Loan Prepayment

Banks and NBFCs offer a facility to pre-pay your Business Loan either partially or fully subject to certain clauses. You can decide to pre-pay your Business Loan depending on the surplus cash with you. While preparing a Business Loan, you can do either of the following:

  • Reduce your EMI while keeping the loan tenure the same as before.
  • Reduce your loan tenure while keeping the EMI constant.

You can choose either of the above options depending on your repayment capacity and business situation.

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