In the age of capitalism, business loans are hugely in demand. Together with the public-sector banks, a lot of private lending institutions have joined the bandwagon of providing business loans to a huge number of established and upcoming businesses. Since firms require business loans for various purposes including expansion plans, overcoming the current operational issues, working capital, etc. EMI on the Business Loan can also be calculated with the help of Business Loan EMI Calculator. Let’s have a look at why one requires business loans and how the EMI can be calculated on the same.
What is Business Loan EMI Calculator?
A business loan can be availed when an individual is falling short of some funding for their business. Business loan can be availed to help in the growth of your business or to have an expansion in another city or in the city, purchase machinery, hire new staff and employees, purchase equipment and inventory etc. but before applying for a Business Loan, one can calculate the monthly EMI that will be deducted so it gives an approximate calculation for the finances.
Business Loan EMI Calculator is a great help when we need to calculate the EMI. To calculate your business loan EMI, one can check it from Paisabazaar.com. You need to fill some details regarding the Loan Amount you wish to apply for and the loan tenure. The EMI is automatically calculated according to the Interest Rate.
How does Business Loan EMI Calculator work?
There is a formula with which the financial institutions calculate the Interest Rate and EMI on the Business Loan, which can be of help to you in case you are willing to apply for the same.
The EMI calculator works on the following parameters –
- Loan amount
- Tenor
- Rate of interest
The formula that’s used is –
E = P * r * (1+r)^n / ((1+r)^n-1)
Where ‘E’ is EMI
‘P’ is the Principal Loan Amount
‘r’ is the rate of interest calculated on a monthly basis
‘n’ is the tenor or duration of the loan
Check – Business Loan Interest Rate of Top Banks
Benefits of using this formula –
- It tells the exact amount of EMI to be incurred over some time. The amount is correct and exact, and there is less probability of error.
- The formula saves time and gives a detailed overview.
- You get accurate results, which you can use to plan your finances accordingly.
- You can plan multiple schedules and EMI instalment tenure and choose the one that suits your financial requirements the best
What are the factors that affect business loan EMI?
Loan amount – The amount that you are going to borrow decides your EMI amount. When the amount is higher, the EMI is high; and when the amount is low, the EMI remains low. However, it also depends on the tenure of the loan.
The rate of interest – It’s very important to choose the loan rate of interest carefully. When the rate of interest is high, the EMI will remain high, and when the interest is low, the amount will remain low.
Tenure – Tenure also plays an important role in deciding the loan EMI. A longer tenure ensures lesser EMI while a shorter tenure ensures high amount of EMI.
Though the EMI amount remains the same, the interest payment and principal payment are not the same. These payments vary each month and keep on fluctuating, but the principal amount remains the same.
Frequently Asked Questions (FAQs)
- What happens when someone misses the EMI amount?
If someone missed the EMI amount it will be adjusted in the next amount and that the next EMI will be double of the current EMI. Also, late payment charges will be levied, depending on the Terms and Conditions mentioned by the financial institution.
- Who is eligible for a business loan?
The Loan Applicant should be between 21 years and 65 years of age generally. However different rules may apply.
- Can the EMI amount be reduced?
Yes, the EMI amount can be reduced by increasing the tenure of the loan. Another way to reduce amount is to pay the majority of the loan amount in one go and then, pay reduced EMIs on the remaining loan amount.
- Can the interest in EMI be reduced?
No, it’s not possible in any circumstances. It remains fixed throughout the payment period.
- Why you should calculate the business loan EMI before taking the loan?
It is important to calculate EMI before taking the loan because this will clear the picture and then you will be able to secure a loan with suitable EMI.
- Does EMI remain same or change in the future?
The EMI usually remains the same; however, if the government decides to increase the interest rate, the EMI amount will increase.
Securing a Business Loan through properly calculated EMI is not a difficult task and can be secured through accurate calculations, deciding on a suitable tenure and loan amount. It is in fact always advisable that one calculates the EMI before applying for a Business Loan so one is well aware of the instalments they have to pay every month.
Reasons to Apply for a Business Loan
Working capital – A company has been in a business for a considerable period of time and now requires working capital for expansion plans. This is very important because every business needs to expand over time. Businesses can’t go stagnant and requires constant growth to maintain its staff, resources and products/services.
Maintaining current operations – Running a business is no easy task and requires a lot of funds to sail through. Sometimes there’s trouble managing current operations in the businesses for the reason that there may be a fund crunch or maybe the company is incurring losses. To manage such a situation, the company requires funds to bring the operations on track.
Buying equipment – The company may require some machines and huge funds that are supremely costly and that they can’t be bought without huge capital. That’s where financial firms step in. They provide the required funds for whatever the needs of the applying company may be and make sure that there’s no fund crunch.
Starting a business – Not everyone has the required capital and savings to start the business on their own. A majority of people require working capital and a huge amount of investment to kick start their businesses. However, getting a loan for starting a business is much more difficult than getting a loan for a running business.
Once a loan is secured, it’s important for the firm to pay back the loan in the repayment duration as mentioned in the loan agreement. The loan may be taken for a long period depending on the strength to pay EMI. However, it’s crucial to pay regular EMIs. Otherwise, it will mount and the final amount will be huge.