A business loan assists every firm, not just while experiencing financial crunches, but also when there is an opportunity for growth. Several commercial platforms have come up with business loan facilities for firms with varying interest rates. To calculate the business Loan EMI in a jiffy, applicants can utilize the Business EMI loan calculator. Listed below are the criteria and calculations used in the business loan calculator.
What are EMIs?
Business loan EMIs or Equated Monthly Installments are the equal amounts of monthly payments to be repaid after availing a loan. It is among the most accessible forms of repayment. The EMI amount is the sum of the principal amount and interest gained.
Using a Business Loan calculator
A business loan calculator is the most convenient tool for calculating the monthly amount required to pay the EMIs at a fixed date of every month. It helps the borrower know the value in advance and helps them to plan on the cash resources required. A business loan eligibility calculator also helps a borrower determine the best-suited plan of repayment that synchronized with the cash cycle of the firm. You can also make people aware of this business loan calculator like doing society registration online, posting an advertisement, etc.
Parameters and Formula:
Listed below are the parameters used in the loan calculator.
- 1. Loan amount
- 2. Tenure
- 3. ate of Interest
The monthly installment of EMI is calculated as :
E = P * r * (1+r)^n / ((1+r)^n-1)
Where ‘E’ is EMI
‘P’ is Principal Loan Amount
‘r’ is the Loan Interest Rate
And ‘n’ is the Duration of the Loan
A business loan calculator can also be extended to determine the EMIs linked with an unsecured loan.
Factors affecting EMI:
- Rate of Interest
As mentioned in the formula above, EMIs are dependent on the rates of interest. The rate of interest can be a flat fixed rate, dynamic, or hybrid. Since the interest rates vary for each banking platform, the EMIs also vary. If the interest rates are dynamic, the final EMI amount will be dependent on the market fluctuations.
- Tenure
As can be seen from the EMI formula above, the EMI amount has an indirect relationship with the tenure of the loan. Hence longer the duration, lower is the EMI amount, and shorter tenure implies a higher EMI amount. The loan calculators are practical because it considers these factors during the calculation.
- Prepayment
If the borrower prepays a certain amount of the loan beforehand, it will be deducted from the final loan repayment amount and thus reduce EMI. An EMI calculator can assist the borrower in such situations.
Advantages of using a business eligibility calculator
- Accessibility
With several banking platforms providing online calculators, the calculation of EMIs is far from complicated. Its unbiased access also helps a business person to budget at any point in time.
- Accuracy
The calculations made using loan calculators are highly precise and free from human errors.
- Budget planning
It is practical to know the EMI amount even before availing of the loan. It helps the borrower to determine whether the loan converges with his needs and cash cycle. Also, it helps you to manage financial services.
Final thoughts
Just as business loan help a prevailing or new business overcome its financial hurdles or crunches, a business loan calculator is a smart and convenient tool in making the right decisions for the economic opportunities available.
