How the Business Loan EMI Calculator Works
Business loan rates depend heavily on whether the loan is secured. Unsecured working capital loans typically carry higher rates, while loans backed by property, plant or receivables are cheaper.
Enter the sanctioned amount, the annual interest rate and the tenure. Term loans commonly run 1 to 7 years; loans secured against property can extend further.
The EMI is calculated on a reducing balance, so early instalments are interest-heavy and later ones repay more principal.
Use the year-wise schedule to see how much interest falls in each financial year — useful when working out the interest deduction in your books.
Formula Used
Business loan EMI uses the standard reducing-balance formula:
EMI = P × r × (1+r)^n / ((1+r)^n − 1)- PBusiness loan principal amount
- rMonthly interest rate (annual rate ÷ 12 ÷ 100)
- nTotal number of monthly instalments (tenure in years × 12)
Example Calculation
Suppose your business borrows 20,00,000 for 5 years at a 15% annual interest rate.
- Loan Amount2,000,000
- Interest Rate15% p.a.
- Tenure5 years
- ResultMonthly EMI ≈ 47,580 (Total Interest: ≈ 854,792)
Important Assumptions
- Interest is calculated on a reducing monthly balance at a fixed rate for the full tenure.
- Many business loans carry floating rates linked to a benchmark such as the repo rate or MCLR. If yours does, your EMI or tenure will change when the benchmark moves.
- Processing fees, documentation charges, stamp duty on security creation, and insurance premiums are not included.
- This calculator models a term loan with equal monthly instalments. It does not model overdrafts, cash credit lines, or loans with a principal moratorium.
- Interest paid on a business loan is generally a deductible business expense, but the calculator shows pre-tax figures. Consult your accountant for the after-tax cost.