With so many financial institutions opening doors and offering flexible services, availing a small business loan has gotten very easy. You can opt for loans to expand your business by buying machinery or investing in equipment or for something as simple as meeting your day to day expenses i.e. working capital.
The repayment of a loan can happen in several ways. One of the ways of repaying is through Equated Monthly Instalments, popularly known as EMIs.
An EMI is the amount payable every month to the bank or any other financial institution until the loan amount is fully paid off. It consists of the interest on the loan as well as the principal amount to be repaid.
To help make EMI calculations easy and offer a quick view into what a small business owner could be expected to pay each month out of his profits, an EMI Calculator comes handy.
Let’s find out in detail about EMI Calculators and how do they work.
EMI Calculators and How They Help While Applying for a Small Business Loan
Let’s take a look at what an EMI calculator is before understanding how it can help small business owners to plan their repayment schedules.
What is an EMI Calculator?
An EMI is calculated using three parameters which are the amount of loan, the tenure of the loan (that is the number of years for which the loan is availed) and the interest rate charged on the loan.
A cost is attached to the loan that you take, which is the ‘interest’ component. Under the EMI methods, since you effectively repay parts of the loan, your loan amount is reduced by that amount month after month. Thus, every month interest is charged on the reducing balance.
EMI calculations can be tedious and lengthy especially for a layman. With the help of a business loan EMI Calculator, you can easily calculate EMIs.
An EMI Calculator can help you figure out the amount you are comfortable paying each month.
Every business has its typical characteristics when it comes to cash management and various expenses. A surplus is when your revenues exceed the expenses and based on this amount you can decide if the EMI is affordable or not.
This helps you plan your finances better for the entire tenure of the loan and is the best approach for someone availing a small business loan.
How to Calculate your EMI Using Business Loan Calculator?
A Small Business Loan EMI Calculator is the best way to figure out the EMI you are comfortable paying every month. As mentioned earlier, the three parameters you have to provide are –
- The loan amount
- The tenure of the loan
- The Interest rate
You can input these values into the calculator and arrive at an EMI. It is possible to try different permutations and combinations of the three inputs and derive the exact EMI that suits you.
The basic formula used by EMI Calculators is:
E = P x r x (1+r)^n/ ((1+r)^n-1),
- E is the amount you will have to pay every month, basically the EMI.
- P is the amount that you want to borrow.
- R is the rate of interest that is applicable but calculated on a monthly basis instead of the annual rate of interest. It is obtained by using the formula r = (annual interest/12) x 100.
- N is the duration of the loan in terms of months. So if you select a term of 5 years, n will be 60.
It is important to consider the time limit for which you are comfortable availing the loan as well as the interest rate factor. For example, a lower EMI will increase the tenure of the loan, which means you can pay small amounts every month but the loan will continue for a longer period of time. It completely depends on the state of your business and the ability to pay up which can vary from business to business.
Benefits Of Using An EMI Calculator
The sole purpose of EMI Calculators is to help laymen figure out an amount that would be a cost to them for a particular period. By simply moving sliders across the three inputs that are the loan amount, interest rate and tenure of the loan, the EMI amount can be obtained. If you want these inputs to be specific you can manually enter them too. Hence, EMI Calculators offer the most user-friendly solution.
2. Error-free Calculations:
Mathematics cannot be everybody’s strong point and EMI calculators work best to avoid long calculations. You can avoid wastage of time taken in rectifying errors and invest it for something more important.
3. Time Saving:
Our time is valuable and we can save it by applying for a business loan online and using EMI calculators to figure out how much you need to pay each month. With all the information like interest rates and EMI payments at your disposal, you don’t even need to step out of your house while applying for a loan. Simply log on to any of the websites offering a business loan and apply for it.
No middlemen are involved in helping you decide your EMI payments. You can do it for yourself and that too with zero cost involved. Most of the websites offer this as a free service where you can input parameters and arrive at the EMIs.
Use EMI calculators to make sure that you are in a position to repay the small business loans to intend to apply for!