Used to fulfill various organizational goals, a business loan helps in starting or expanding an enterprise by helping entrepreneurs overcome their financial limitations. Whether it is meeting numerous operational expenses, purchasing equipment or machinery, procuring inventory, or setting up an office space, a business loan is a feasible way to acquire substantial funds and run the processes smoothly. Offered without any collateral at an attractive interest rate, a business loan can be conveniently availed from a financial institution by applying online without stepping outside.
Easily accessible and quickly disbursal, an online business loan is your go-to solution for obtaining working capital at flexible repayment terms. However, one must assess various loan parameters such as loan amount, tenure, interest rate, and especially the equated monthly installments (EMIs), to plan the finances accordingly. While small business loans involve minimal paperwork along with several additional benefits, one must use the business loan calculator to get clarity regarding numerous loan aspects and avoid any future discrepancies.
Read on to know more about the benefits of a business loan calculator before applying for a business loan.
A business loan calculator is a freely available and easy-to-use online tool that computes the monthly installment (EMI) amount accurately which in turn helps in planning your monthly budget and expenses accordingly. The tool calculates the EMI amount based on loan parameters you provide as per your loan requirements with the following formula:
EMI = P × r × [(1 + r) n/ ((1 + r) n – 1)]
The three vital parameters visible in the formula which help in calculating the EMI amount are:
- Principal loan amount (P) – Directly proportional to the EMI amount, the principal amount depends upon your business loan requirements and plays a key role in the computation of the monthly installments.
- Loan tenure (n) – Inversely proportional to the EMI amount, repayment tenure is another key factor that helps in keeping an affordable EMI. One should choose the tenure quite carefully upon performing comprehensive research about various monthly expenses and other financial commitments that could impact the loan EMI payments negatively.
- Interest rate (r) – Also directly proportional to EMI amount, it is decided by the lender based on the borrower’s age, monthly salary, nature of employment, work experience, credit score, etc.
Major benefits of a Business loan calculator
- Easy to access
A business loan calculator is easily available online for use for free and could be used countless times to compute the EMI amount corresponding to different loan parameters. Additionally, the calculator can be accessed anytime through any internet-compatible device such as a smartphone, tablet, or laptop from anywhere in the world.
- Convenient to use and time-saving
A business loan calculator is engineered to compute the EMI in real-time upon entering the loan tenure, loan amount, and rate of interest. An efficient and effective tool to represent the overall repayment structure of your loan, it saves a lot of time and energy for an individual because calculating the EMI amount manually corresponding to different loan parameters is quite difficult and time-consuming.
- Accuracy guaranteed
While the manual calculation is complex and takes a lot of time, it also increases the chances of human error whereas a business loan calculator is designed to provide accurate results with a pre-defined algorithm. All you need to do is just enter the loan parameters and the tool shall compute the EMI amount payable within few seconds.
- Compare the lenders
Another key benefit of using a business loan calculator is that it helps in comparing the offers of different lenders to choose the best deal available in the financial marketplace. With a clear understanding of the EMI amount, you gain an upper hand in negotiating with the lender and finalizing the loan best suited to your monthly expenditures as well as business requirements.
- Improves financial planning
The most crucial feature of using a business loan calculator is that it helps in the proper execution of your finances by providing you the exact numbers and clarity about the funds you will be able to spend on loan EMIs without compromising on the fixed monthly expenses. By assessing your affordability, you can cut down on your needless expenditures and increase your repayment capacity.
Hence, using a business loan calculator to compute your EMIs in advance helps in securing an ideal loan which ensures a constant influx of funds to expand your enterprise.