A business loan can be a go-to option to establish a new enterprise or expand your existing organisation. It is an excellent solution for growing your firm, acquiring modern machinery, recruiting new employees, or paying off all your obligations. Many banks and non-banking financial organisations (NBFCs) now provide attractive interest rates on business loans. This loan is available in two forms: secured and unsecured.
However, you must meet the eligibility requirements established by the financial institution from which you intend to secure a business loan. Additionally, a business loan repayment plan necessitates meticulous planning, and timely payment of EMIs needs effective financial management to ensure your monthly budget does not diminish. You can plan your budget using the business loan calculator to establish your monthly EMI commitments. This will allow you to know the precise amount of your monthly EMIS.
How is Business Loan EMI Determined?
With the help of a business loan calculator, you can calculate your EMIs in just a few seconds. You are only required to provide three inputs:
- Principal Amount: The amount you wish to obtain.
- Interest Rate: This is the fee a lender assesses on the loan’s principal. It is stated as a percentage.
- Repayment Duration: The time duration you wish to choose for settling your loan.
You only need to visit any of the financial institutions and enter these three elements to get your result.
Moreover, you may also use the manual formula to calculate the same.
E = P * r * (1+r)^n / ((1+r)^n-1)
where ‘E’ is EMI,
- P = principal loan amount
- R = rate of interest calculated every month
- N = tenure or duration of the loan
How is the Interest on a Business Loan Calculated?
The proportion charged by the lender on the requested mortgage balance is known as the rate of interest. The percentage of the primary value is used to indicate it. Borrowers are often given two interest rate quotes: nominal interest rate and annual percentage rate (APR).
The total yearly interest rate charged by the lender is known as the nominal interest rate. On the other hand, APR is the sum of all loan costs, including processing fees, interest rates, etc.
Benefits of Using a Business Loan Calculator
There are several advantages of employing a business loan calculator. Some of them are listed below:
Using this calculator helps you avoid wasting time on tiresome calculations and gives you rapid results.
Simple to Use
The tool is easy to use as it will compute the results for you once you have entered all the necessary information, such as the interest rate, loan term, and loan amount.
The calculator removes the likelihood of manual calculation mistakes.
Using this tool will allow you to compare different loan options as well as different loan conditions.
Ensures Effective Budgeting
A business loan calculator will help you to undertake better financial planning as you will be aware of your payback commitments.
Factors Influencing Business Loan EMI
Three primary elements influence a business loan EMI:
Amount of the Loan
The loan amount you seek serves as the foundation for your EMI. When your loan amount increases, so do your EMI, and vice versa.
Rate of Interest
A business loan’s interest rate is a vital part. A higher interest rate will result in a larger EMI cost; therefore, you should work hard to acquire a reasonable deal on the business loan interest rate.
The loan duration is the time frame during which you service the loan. A longer tenure will result in a reduced EMI cost, but it will also have an influence on the interest component and raise it.
Documents Required For Business Loan
In order to save time and process your loan application easily, you must be aware of the required documents. Below is the list of necessary documents for a business loan:
- Identity proof: Aadhaar card, Driving licence, Voter ID card
- Address proof: Aadhaar card, Utility bills, Passport, Voter ID card
- PAN card
- Bank statement for the last six months
- ITR form
- Income calculations, balance sheets, and profit and loss (P&L) statements for the previous two years
- Declaration of the sole proprietorship or a verified copy of a partnership deed
- Certified copy of the articles of incorporation
Things to Keep in Mind While Applying for a Business Loan
- Execute a lender comparison analysis.
- Borrow only the required amount.
- Make an accurate cost estimate.
- Do not submit duplicate loan applications.
What credit score is required to qualify for a business loan?
You need a credit score of at least 700 or above (may vary across the mender) to be eligible for a business loan. Your chances of obtaining a company loan with negotiable rates increase with your score.
Is it crucial to determine my EMI before applying for a business loan?
It is not mandatory, but you may plan your budget properly by calculating the EMI in advance to calculate how much you would have to pay each month.
Do I need to pay any charges to use a business loan calculator?
No, this tool is available free of cost. You may visit any financial institution’s website or use any third-party search engine to use the same.