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Total EMI

49,919

Total Interest

69,80,559

Total Payments

1,19,80,559

Break-up of Loan Amount
Created with Highcharts 4.2.2 50,00,000 69,80,559 Total Interest Principal Loan Amount
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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 MyMoneyMantra.

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]

Where

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 MyMoneyMantra, we use the following parameters to give an estimate about the loan eligibility, amount of loan and interest rate for a borrower:

Parameters Business 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.

Age

21 - 65 years

Loan Amount

50,000 to 100 Crores

Interest Rate

13.50% - 21%

Loan Tenure

Up to 5 years

Business Vintage

For self-employed professional - 3 years

 

For self-employed businessmen - 5 years

Annual Turnover

1 Crore and above

Banking Stability

6 months and above

CIBIL Score

750 or above

Other Eligibility Conditions

The 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 Tenure

2 years

3 years

5 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.

FREQUENTLY ASKED QUESTIONS

Do banks provide loans to small businesses in India?

Ans. The top and leading public sector and private sector banks give small Business Loans in India under several government schemes such as CGTMSE, Mudra Loan, and so on. Many select banks and finance companies offer unsecured loans to a small business having a turnover of 1 Crore or above according to the assessment of their financial stability, growth, future plans, debt servicing, management reputation, and other factors. Nowadays most of the NBFCs have started encouraging small business and are offering loans without any collateral although the rate of interest of such loans is on the higher side.

How can I apply for a Business Loan in my city?

Ans. You can apply for a Business Loan online in your city if you have a fair and sufficient turnover alongwith business stability and good credit history. A comparison of various Business Loan offers can be made on MyMoneyMantra.

What if I miss EMI payment or there is an ECS bounce?

Ans. In case you miss your EMI payment or if your ECS bounces, the bank will charge the penalty and the same will be reflected in your CIBIL report thus having an impact on your credit score.

What if I get delayed in paying the Business Loan EMI?

Ans. A penalty is charged by the bank for delaying the EMI payment. The amount of penalty varies throughout the banking sector.

Why is it necessary to calculate EMI beforehand?

Ans. It is highly recommended to calculate the EMI in advance to ensure the stability of payments. When you take a loan you promise the bank to pay timely the amount agreed upon every month. Therefore before taking a loan one should do a proper planning of the finances keeping in mind their monthly expenses, income, and other factors to avoid any discrepancies with regards to payments.

Does the loan tenure affect my EMI for a Business Loan?

Ans. You can avail a Business Loan for a maximum tenure of 5 years. The tenure definitely has an effect on your monthly EMI. The longer the tenure the lower your EMI would be.

How does MyMoneyMantra EMI calculator help in calculating EMI?

Ans. MyMoneyMantra calculator helps you to calculate the EMIs of different banks based on the details provided by you. You can also compare the various banks with regards to their interest rates, EMI option and choose the best one accordingly.

How is Business Loan EMI calculated?

Ans. You can calculate the EMI of your Business Loan through the "Business Loan EMI Calculator" available on our website. You can also use a combination of the loan amount, tenure, the interest rate to know the EMI online quickly.

The EMI calculator helps you to know how much interest you are expected to pay with respect to your loan tenure. The longer the loan tenure, more the interest rates one will have to pay for the same.

What will be my monthly EMI?

Ans. The monthly EMI for your Business Loan will depend upon your incomes and expenses. The bank may advise you the EMI of 35% to 45% of your net incomes for the ease of EMI. You can also calculate the EMI for your Business Loan instantly through an online calculator to know your exact repayment capacity.

Is the Business Loan EMI fixed or can it change in future?

Ans. Here are some situations in which your EMI can change:

  • Banks generally offer floating rates on the Business Loans so in case the interest rate increases the EMI will remain constant and the loan tenure shall increase, i.e, you will pay the same EMI amount but for the longer period. However, in case your loan tenure is maximum as permissible limit then your EMI can be increased.
  • In the case of partly disbursed loans sanctioned under the trenched EMI scheme, with every disbursement the loan EMI will increase.
  • You can even opt to prepay your loan or reduce your EMI and keep the loan tenure as it is or keep the EMI unchanged and reduce the duration of the loan. However, it is always recommended and beneficial to keep the EMI as it is and reduce the loan period.
  • Any other situations may have an effect on your EMI as per the terms and conditions of the loan agreement.
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