Running a business is no easy task, and at times, you may require additional funding to expand, manage cash flow, or invest in growth opportunities. In such cases, an online business loan can be a great solution. However, managing loan repayments can sometimes be overwhelming. Thankfully, a business loan EMI (Equated Monthly Installment) calculator can be your best friend when it comes to planning repayments in an organized way.
In this blog, we’ll guide you step-by-step on how to use a business loan EMI calculator and effectively plan your loan repayments. By the end of this guide, you’ll be able to make informed decisions about your loan and manage your finances better.
Why Use an EMI Calculator?
A business loan EMI calculator helps you calculate the exact EMI amount you’ll need to pay each month based on your loan amount, interest rate, and tenure. It takes the guesswork out of the equation, allowing you to plan your finances more effectively. Using an EMI calculator before applying for an instant business loan can give you clarity on your monthly repayment obligations, helping you avoid overburdening your business with high loan payments.
Step-by-Step Guide to Using a Business Loan EMI Calculator
Step 1: Understand the Key Parameters
Before using the calculator, you need to understand the key parameters that will affect your EMI calculation. These are:
- Loan Amount: This is the principal amount you borrow. It can vary depending on the loan type, the lender, and your requirements.
- Interest Rate: The interest rate charged by the lender on the loan. This is usually expressed as an annual percentage rate (APR).
- Loan Tenure: This is your loan’s repayment period. Depending on the loan type and lender terms, it could range from a few months to several years.
- Processing Fees: Some lenders charge a processing fee, which could impact your overall repayment. Though this isn’t directly included in the EMI calculation, it’s important to consider it when evaluating loan affordability.
Step 2: Find an Online EMI Calculator
An online business loan EMI calculator is freely available on most financial institutions’ websites. Simply search for an “online business loan EMI calculator,” and you’ll find several options. Many such calculators are easy to use and require no technical knowledge.
Step 3: Enter the Loan Details
Once you’ve found the right calculator, input your loan amount, interest rate, and tenure in the respective fields.
- Loan Amount: Enter the amount you plan to borrow. For example, if you want to apply for a business loan of ₹5,00,000, enter ₹5,00,000.
- Interest Rate: The next field asks for the interest rate. Input the annual interest rate provided by your lender. If the rate is 12% per annum, type “12” in the field.
- Loan Tenure: Finally, enter the loan tenure. You can usually choose from a dropdown menu where options range from a few months to several years. For instance, if your loan term is 3 years, select “36 months” from the available options.
Step 4: Get the EMI Result
Once you’ve inputted all the required information, click the “Calculate” button. The calculator will automatically provide you with your monthly EMI amount. This is the amount you’ll need to pay every month for the duration of your loan.
For instance, if you’ve entered a loan amount of ₹5,00,000, with an interest rate of 12%, and a loan tenure of 3 years, the EMI calculator might show that your monthly repayment is ₹16,510.
Step 5: Evaluate the Results
Now that you have the EMI amount, it’s time to evaluate if this amount fits within your business’s cash flow. Consider the following:
- Business Cash Flow: Do you have sufficient cash flow to cover the EMI each month? Your business must generate enough revenue to make timely payments without affecting your day-to-day operations.
- Flexibility: Many lenders offer flexibility in the loan tenure. If the EMI is too high, you can extend the loan tenure, which will reduce the monthly payment, though it may increase the total interest paid overtime.
- Prepayment Options: Check whether your lender offers any prepayment options. If your business performs better than expected, you might want to pay off your loan early to reduce your interest burden.
Step 6: Adjust Parameters to Find the Right Loan Structure
If the EMI amount seems too high or too low, don’t worry! You can always adjust the parameters to find a loan structure that fits your budget:
- Reduce Loan Amount: If the EMI is too high, consider reducing the loan amount. This will result in a lower EMI but ensure that the loan amount is still sufficient for your business needs.
- Change Loan Tenure: Extending the loan tenure will reduce your EMI but may increase the total interest you pay overtime. Shortening the tenure will increase your EMI but reduce the interest burden.
- Adjust the Interest Rate: If the EMI is too high, you can look for other lenders that may offer a better interest rate. An instant business loan might provide you with competitive rates depending on your credit score and business profile.
Step 7: Track and Monitor Your EMI
Once you have planned your loan repayment strategy, it’s important to track your monthly payments. Ensure that you pay on time to avoid penalties. Setting up automatic payments or reminders can help you stay on top of your loan repayment schedule.
Additionally, if your business performance improves, you might want to consider increasing the EMI to reduce the loan tenure or paying off the loan early.
Conclusion
Using a business loan EMI calculator is an essential tool for any entrepreneur who is considering taking out a business loan. By calculating the EMI, you can effectively plan your repayments, ensuring that they fit within your business’s financial capabilities. This will help you maintain a stable cash flow and avoid any repayment-related stress in the future.
