In March 2024, business loans issued by lending institutions increased by 16.3%, highlighting a strong demand for capital to drive initiatives like expansion. This increase indicates that companies are ready to seize growth opportunities, leveraging business loans to fuel their ambitions.
While a business loan can provide you with the required funds, it is crucial to understand your monthly EMI obligations before committing. This is why many borrowers use a business loan EMI calculator before even applying. By inputting your loan amount, tenure, and interest rate, this tool can give you a clear picture of your monthly payments, helping you make an informed decision. In this article, we’ll understand the importance of using a business loan EMI calculator, how to use one, and some tips to use it effectively.
Why Is It Crucial To Understand Business Loan EMIs?
Business loan EMIs directly impact your cash flows, affecting the overall capital and profitability of your business. Thus, knowing how to calculate business loan EMI can help you foresee your monthly outflows and allocate resources strategically without hampering daily operations.
Using a business loan EMI calculator can also help you understand important aspects involved in the repayment structure, such as the total interest payable over the loan tenure. This insight can help prevent unexpected expenses and reduce the chances of missed or late payments, which could negatively impact your financial profile and credit score.
How to Use a Business Loan EMI Calculator?
Many reputed lenders, such as SMFG India Credit, offer free-to-use business loan EMI calculators online. Here’s how you can use one to calculate your business loan EMI within seconds:
- Specify the loan amount you wish to borrow. This amount serves as the principal used to calculate your monthly business loan EMI and is one of the primary factors influencing the EMI.
- Enter the interest rate you are comfortable paying in addition to the loan amount. Note that the final interest rate is determined solely by the lender.
- Select the repayment tenure for the loan. Most lenders offer tenures ranging from 12 to 48 months*, allowing you to choose based on your financial situation and convenience.
Once you’ve entered all these details, the projected EMI will be displayed on the screen. If you are satisfied with the amount and other loan terms, you can proceed with your application to be considered for a business loan.
However, if the EMI exceeds your budget, you can adjust the information entered into the business loan EMI calculator until you are satisfied with the projected amount.
Please note that the calculation is only for informational purposes. The actual EMI will vary depending on several factors, including the lender’s policy at the time of loan application.
To make the most of the insights provided by the EMI calculator, remember to account for the following when evaluating the overall loan cost:
- Your existing financial obligations
- Savings goals
- Other associated fees and charges, such as processing and prepayment fees
The Benefits of Using a Business Loan EMI Calculator
Here’s how a business loan EMI calculator can aid your decision-making process:
- Improved Cash Flow Management: With a clear picture of how much you’ll need to pay each month, you can allocate funds more strategically, ensuring that you can manage your day-to-day expenses without compromising business growth.
- Assessing Financial Readiness: The calculator can also help you assess whether your business is financially ready for the loan by evaluating if the projected EMIs fit within your existing cash flow. This prevents taking on more debt than you can handle, ensuring you only take out what your business can comfortably repay.
- Planning for Future Growth: Understanding how the loan repayment fits into your broader business strategy is crucial. Using the EMI calculator regularly throughout the loan process allows you to plan for the long-term financial impact, including how the loan might affect your profitability and growth goals.
Summing Up
Understanding how to calculate business loan EMIs is an essential step before applying for a loan. Using a business loan EMI calculator can help you get a realistic estimate of your monthly financial commitments and long-term costs over the life of the loan. This way, you can make informed decisions that are profitable to your business while maintaining a strong credit history through timely payments.
*EMI calculators only tell you an estimated figure. Your actual EMI, interest rate, and other loan terms will depend on your eligibility and the lender’s policy at the time of the loan application.