Business Loan EMI Calculator
Estimate your business loan EMI and check whether the repayment fits your monthly cash flow β before you commit working capital to debt service.
The First Question: Term Loan or Working Capital?
"Business loan" is an umbrella covering two fundamentally different products, and choosing the wrong one is the most common SME financing mistake:
- Term loan β lump sum, fixed EMI, fixed tenure. Right for one-time capital expenditure: machinery, premises, renovation, a delivery fleet. The asset generates returns over years; the loan amortises over years. Matched.
- Working capital (OD/CC limit) β a sanctioned limit you draw and repay as needed, paying interest only on the utilised amount for the days used. Right for inventory cycles, receivables gaps, seasonal stocking. Using a 5-year term loan to fund a 60-day receivables gap means paying interest for years on money you needed for weeks.
This calculator models the term-loan EMI. For overdraft costing, use our Overdraft Interest Calculator.
The ROI Test Before Any Business Borrowing
Debt makes sense only when the borrowed capital earns more than it costs. The discipline: estimate the incremental annual profit the loan-funded asset will generate, divide by the loan amount, and compare against the interest rate.
Example: a βΉ20 lakh machine increases output worth βΉ6 lakh in annual gross margin. Return on borrowed capital = 30%. Loan cost = 14%. Spread = +16% β borrow. If the machine adds only βΉ2 lakh (10% return), borrowing at 14% means the loan eats the business slowly β every EMI is partly funded from existing profits, not new ones.
Government-Backed Routes Most Small Businesses Never Use
| Scheme | Amount | What Makes It Special |
|---|---|---|
| MUDRA β Shishu | Up to βΉ50,000 | No collateral; micro-enterprises, kirana, vendors |
| MUDRA β Kishore | βΉ50,000β5 lakh | No collateral; growing units |
| MUDRA β Tarun | βΉ5β10 lakh | No collateral; established small units |
| CGTMSE-covered loans | Up to βΉ5 crore | Govt guarantees the bank up to 85% β bank lends without collateral |
| PM SVANidhi | βΉ10Kβ50K | Street vendors; interest subsidy on timely repayment |
The practical detail nobody tells you: banks sometimes resist CGTMSE because the guarantee fee (0.75β1.5% annually) is passed to the borrower, and processing is slower than a collateralised file. Ask explicitly, in writing, for your loan to be covered under CGTMSE if you lack collateral β branches can and do process these when pushed.
What Lenders Actually Read in Your File
For business loans, underwriting runs on documents that prove cash flow, not projections:
- Banking turnover β 12 months of current-account statements. Lenders compute average monthly credits and look for healthy balance maintenance; cheque bounces and frequent near-zero balances are red flags that no profit-and-loss statement can repair.
- GST returns (GSTR-3B) β the de facto turnover proof. Consistent filing with growing turnover unlocks pre-approved offers; mismatches between GST turnover and claimed revenue kill files instantly.
- ITRs + audited financials, 2β3 years β banks generally want debt-service coverage (annual cash profit Γ· annual EMI obligation) above 1.5Γ.
- Promoter's personal CIBIL β for proprietorships and most MSME loans, your personal score IS the business's score. A personal score under 700 prices the whole business as subprime.
Interest Is Deductible β Which Changes the Real Cost
Unlike personal borrowing, business loan interest is a fully deductible expense under Section 37(1). For a profitable business in the 30% bracket (or 25% corporate rate), a 14% loan effectively costs about 9.8β10.5% after tax. Processing fees and even the CGTMSE guarantee fee are deductible too. The principal repayment, however, is never deductible β it's a balance-sheet item, not an expense.