Business Loan Calculator

EMI = P × r × (1+r)^n / ((1+r)^n − 1), where P = principal, r = monthly interest rate (annual rate ÷ 12 ÷ 100), n = tenure in months. For a ₹50 lakh loan at 12% p.a. for 5 years: r = 0.01, n = 60, EMI = 50,00,000 × 0.01 × (1.01)^60 / ((1.01)^60 − 1) = ₹1,11,222.

Business loan interest rates in India typically range from 8.5% to 24% per annum, depending on the lender, borrower's credit profile, loan type, and collateral. MSME loans under government schemes (MUDRA, CGTMSE) often attract rates of 8.5–12%. Private bank business loans range from 10–18%. NBFCs may charge 14–24%. Rates are lower for secured loans (property/equipment as collateral).

Common documents include: business registration certificate (GST, MSME, or incorporation certificate), last 2–3 years of audited financial statements and ITR, 6–12 months of bank statements, identity and address proof of promoters, ownership proof for collateral (if secured), and a business plan for larger loans. Specific requirements vary by lender and loan amount.

A term loan has a fixed repayment schedule (EMI) over a defined tenure - used for capital expenditure like machinery, equipment, or property. A working capital loan (overdraft, cash credit, or bill discounting) is a revolving credit line for day-to-day business expenses like raw materials and salaries - you draw and repay as needed, paying interest only on the amount used.

Three ways: (1) negotiate a lower interest rate by improving your credit score or providing collateral; (2) choose a longer tenure - this reduces EMI but increases total interest; (3) make a larger down payment to reduce the principal. Use the EMI formula: a 1% rate reduction on a ₹50 lakh, 5-year loan saves approximately ₹2,600/month.

Amortization is the process of gradually paying off a loan through regular EMI payments. In the early years, a larger share of each EMI goes toward interest; in later years, more goes to principal repayment. An amortization schedule shows the exact split month by month (or year by year). This matters for tax planning - in India, interest on business loans is tax-deductible under Section 37(1) of the Income Tax Act.

Yes. Interest paid on a business loan is fully tax-deductible as a business expense under Section 37(1) of the Income Tax Act, 1961, provided the loan is used for business purposes. This means if your tax rate is 30% and you pay ₹12 lakh in interest, you save ₹3.6 lakh in taxes, making the effective interest cost significantly lower than the nominal rate.

A secured business loan requires collateral - property, machinery, stock, or receivables pledged against the loan. Lower interest rates (typically 8.5–14%) because the lender's risk is reduced. An unsecured business loan has no collateral requirement but commands higher rates (14–24%) and stricter credit criteria. MSME loans under CGTMSE guarantee scheme allow collateral-free loans up to ₹2 crore.

Making lump-sum prepayments reduces the outstanding principal, which lowers subsequent interest charges. The EMI stays the same but the tenure shortens, reducing total interest paid. Some lenders charge a prepayment penalty of 2–4% of the prepaid amount (less common after RBI directives on floating-rate loans). Calculate savings with the EMI formula using the reduced principal.

DSCR (Debt Service Coverage Ratio) = Net Operating Income ÷ Total Debt Service (annual EMI + interest). A DSCR ≥ 1.25 is typically required by banks, meaning the business earns ₹1.25 for every ₹1 of debt repayment. A higher DSCR improves your loan eligibility and may reduce the interest rate. Lenders use DSCR to assess whether the business generates sufficient cash flow to service the loan.