Taking loans for business is nothing new and uncommon. Businesses thrive on loans, and there is no industry which thrives on this typical business. With demands of business loans increasing greatly in the market, public sector banks, as well as various private money lending institutions, offer loans to established businesses and start-ups. There are various purposes for which these business loans are needed including working capital, machinery loans, term loans, and so on.
It is obvious that EMI payments are the most common ways of repaying the business loan. Businessmen mainly use business loan EMI calculator for calculating the total amount of the EMI that needs to be paid for the loan taken.
Business Loan EMI Calculator
Business loans are taken for fulfilling the funding requirements of the business. Whether the business is planning to buy new machinery, looking for expansion, or needs working capital – all these can be fulfilled with the support of business loans. Before making a final decision regarding taking the loan, calculate EMI amount that needs to be paid with the help of EMI calculators. Managing finances in the business get easier and convenient once the EMI sum for the loan is known. For calculating the EMI on a calculator, one needs to furnish some details and figures, and the calculator will show the EMI that needs to be paid for the loan.
Working of an EMI Calculator for Business
Whether it is an EMI calculator for commercial shop loan or any other kind of business loan, the working concept of the calculator is almost the same. EMIs and interest rates on business loans are calculated with the assistance of formula, and almost all financial institutions work on this model. If you want to avail the loan, you can check in the EMI calculator by entering the following criteria.
- Amount of the loan you intend to take
- Rate of interest at which the loan is offered
- Tenure for which the loan is taken
The simple formula which is used in the calculation of the EMI for the business loan:
E = P * r * (1+r) ^n / ((1+r) ^n-1)
Here ‘E’ stands for EMI Amount
‘P’ is the Principal Loan Amount
‘r’ is the Rate of Interest, which is calculated every month
‘n’ is the Tenure or the Time Duration for which the loan is taken
Advantages of using an EMI Calculator
There are many benefits of using an EMI calculator when you are planning to take a small business loan. Some of these advantages include:
- Almost the exact amount of the EMI is shown, which needs to be incurred over a period of time. The chances of errors with the calculator are minimal and negligible, and the amount shown is accurate and correct.
- Finances for the business can be planned properly with the use of the calculator as the amount shown is perfect.
- Using the EMI calculator helps in saving lots of time in calculating the EMI for the business loan. Not only this, but the detailed overview is also obtained from the same.
- Once the sum of the EMI is known, a businessperson can plan other EMI instalment tenures and multiple schedules for other loans. It helps in choosing loan plans which are most suitable for meeting the financial requirements of the business in the best possible manner.
Factors determining EMI Amount for Small Business Loans
When you are using a commercial loan EMI calculator or EMI calculator for a business loan, there are some factors which determine the sum of the EMI which needs to be paid. These are as follows:
- The Cumulative of Loan taken: The total of EMI that needs to be paid depends on the sum of the loan that is borrowed. When the borrowed amount is high, it is obvious that the EMI sum will also be high. However, the loan amount is just not all. The other factors are also important.
- The Tenure for which the Loan is taken: One of the most important factors for calculating the loan EMI is the tenure for which the loan is taken. If the tenure of the loan is long, the EMI amount is less and vice versa.
- The Rate of Interest of the Loan: Rate of interest of the business loan is a crucial factor and needs to be chosen very carefully. Higher rate of interest implies that the sum of loan that needs to be repaid is high. The EMI amount is also high in this case. With a low rate of interest, the EMI amount is also low.
Business Loan Prepayment
Whether you are taking a personal loan, car loan, house loan, or business loan, there is always an option of loan prepayment. While some financial institutions and banks take a loan prepayment charge, others do not charge for the same. However, there is a clause that the prepayment without penalty can be done only after the payment of some EMIs, say 6 months or so.
Loan prepayment is paying a considerable amount of the loan before the end of the tenure of the loan. While making prepayments, there are usually two options given by the bank:
- Reduction of EMI amount by keeping the tenure of the loan same
- Keeping the EMI same and reducing the loan repayment tenure
The option that is chosen will depend on the monthly repayment capacity of the businessman. In many cases, it has been seen that the business makes a good profit, and that amount is used for making loan prepayment. Either full loan amount or partial payment can be done for the loan.
Using an EMI calculator for business loans helps in getting accurate results for the sum of EMI that needs to be paid. If you are not very confident in using the calculator on your own, seek professional assistance, and get accurate results.