A lot of money is required to run a business well. There are many ways to raise capital for business. One of these is a business loan. Whether you are big business or small, you will often feel that more money should be invested in the business so that production units can be increased. For this, you can take a business loan from NBFC or banks. The loan that you will take, you can either spend it on business or on related activities.
There are many lending institutions. Before finalizing anything, you should do a good research about the loan product. Since the loan amount has to be repaid, it will also be included in the monthly expenses of the business.
Lenders also provide business loan EMI calculators to help potential customers take decisions regarding business loans. Before we get into the depth of this topic, let us tell you what a business loan EMI is.
What is business loan EMI?
Equated Monthly Instalment or EMI. Every month you take a loan, you return it to the bank or lender in a certain amount. It has two parts. The first is the principal amount of the loan and the second interest on it. The loan amount attracts interest for the entire period. This amount is fixed and is paid every month. The EMI is calculated through the principal amount, interest rate and loan term.
What is a business loan EMI calculator
Business loan EMI calculator is a calculator that tells how much amount you can take as loan for business. It will not be too heavy on your monthly expenses. It tells how much amount you have to pay back to the lender every month.
For example, suppose you took a business loan of Rs 1 lakh for a period of 2 years at an interest rate of 25 percent. So the loan that you will have to repay will be 1, 84, 275 rupees. Now the EMI calculation will be something like this.
EMI = [P X R X (1+ R) ^ N] / [(1+ R) ^ (N – 1)],
P means principal amount ie principal amount
R- Rate of interest
N- Term of Business Loan
The EMI calculator works on the formula stated above. In case of low interest rate,
Interest is calculated on the reduced principal amount every month.
Benefits of loan EMI calculator
Easy to know EMI: Gone are the days when you had to calculate EMI of loan account with pen and paper. With the EMI calculator, just enter some information and press enter. EMI Business Calculator will do the rest of the work.
Visualisation Benefit: Most EMI calculators in India show payments in visual format. In this table, you see the loan period (monthly), opening balance, EMI amount, principal amount paid and outstanding balance in table format. It is easier to understand things in visual format than written on paper.
Financial Planning: Business is full of risks. Nobody knows what happens when. Financial decisions are difficult to make because there is a lot of capital involved. Since EMI has to be paid every month, you can plan while taking financial decisions.
How does a loan affect EMI?
After calculating the EMI amount, if you feel that the EMI amount is more, then you think about reducing it. To reduce the EMI amount, you have to understand which factors affect EMI. These are:
Interest Rate: The interest rate is an important factor for reducing the EMI amount. As mentioned above, interest rate plays an important role in EMI. Lenders have the highest competition regarding this factor because the customer takes a loan from the same lender whose interest rates are cheaper. So search for many business loan offers and choose the best among them.
Keep in mind that the higher the interest rate, the higher the EMI will have to be paid. At the same time, there will be a lower EMI if there is a lower interest rate. Keep in mind that the interest rate will depend on your business loan eligibility.
Loan duration: Another important factor that affects the loan EMI is the duration of EMI. This is the period for which the loan has been taken and in which the loan has to be repaid in full. A longer duration means that the principal amount of time is longer, which reduces the EMI. But also keep in mind that due to long duration, the amount of interest also increases.
This is a serious situation and in such a situation, the decision should be taken carefully. On the other hand, if the loan period is short, then the principal amount is only a few months and the interest rate decreases. But the EMI amount increases. Therefore, you should consider all the options and take any one.
Loan amount: The principal or loan amount has a large contribution to the EMI. This is the basis of all EMI calculations. The higher the business loan amount, the higher the EMI amount. The lower the loan amount, the lower the EMI amount. As a business owner you will have different needs, which will require a lot of money.
However, the loan amount should not be less than the requirement. This is where the business loan EMI calculator comes in handy. Fill in the amount you want, fill the interest rate and enter the loan you want for how many years. By entering this information, you will know how much EMI you have to pay every month in lieu of the loan.