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When you take a business loan from a bank or NBFC, you are charged an interest on the principal loan amount that you need to repay. The business loan interest rate can be fixed or floating and accordingly your monthly instalments are calculated. These are commonly known as EMIs or equated monthly instalments. An online business loan EMI calculator can be used to calculate the EMIs to be repaid. Also, it’s best to understand the loan EMI formula, it’s components and how banks and NBFCs use it to arrive at the EMI amount that borrowers need to repay.

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As can be understood, these EMI amounts comprise of the loan amount principal (borrowed sum) and the interest charged upon them. Based on the financial lender you are borrowing from, the EMIs will vary.

As a borrower, let us help you to understand what is a business loan EMI and how to calculate business loan EMI using a business loan EMI calculator online tool.

What is a business loan EMI?

A business loan EMI is the amount repaid by the borrower every month until the entire amount (principal + interest) is repaid.

The EMI is based on different factors, mainly the loan amount, the loan interest rate, and the tenure or duration of the loan.

Other factors that affect the loan amount and interest rate are:

  • Type of business loan (e.g., machinery loan, working capital loan, cash flow loans etc.)
  • Secured or unsecured business loans (i.e., loans without collateral)
  • Business vintage, borrower’s creditworthiness, ongoing loans, business loan eligibility

What is a business loan EMI calculator?

A business loan EMI calculator is an online tool that enables borrowers to quickly calculate the EMIs they need to repay every month to the lender.

The EMI calculator can help borrowers understand the split (i.e., actual amount + interest paid) and repayment schedule and plan their repayment amount, terms and conditions accordingly.

At Tata nexarc, we offer collateral free business loans up to ₹30 lakhs to MSME owners. You can use our online business loan EMI calculator to calculate the loan EMI amount you need to repay every month. Online loan application, interest rates starting at 13% p.a., and loan offers made in only 5 minutes. Explore now.

How to use a business loan EMI calculator?

It is fairly easy to use Tata nexarc’s EMI calculator to evaluate the monthly instalments you have to repay.

Visit the link to the Business Loans page and use the online EMI calculator tool to fill in the details:

  • Loan amount: Type or use the ruler to fill in the loan amount you want to borrow for your business (e.g., 40 lakhs)
  • Tenure: Type the number of months you want to repay the loan in (e.g., 36 months, 40 months etc.)
  • Reducing rate of interest: Type in the business loan interest rate applicable on your loan (Note: Use interest rate % per annum instead of per month, e.g., 15% p.a.

Your EMI amount will be displayed.

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Next step: Click on ‘Apply now’ if you want to apply for the business loan or get in touch with our Business Loans team to learn more about business loan eligibility, documents required and more.

How to calculate business loan EMI using formula?

There is a simple formula used to calculate the EMIs you will have to pay for your loan.

Business loan EMI formula:

E= P x r x (1+r)^n / [(1+r)^n-1]


E = The EMI to be paid

P = The principal amount borrowed

r = The interest rate per month

n = The loan duration

While you can place relevant numbers in the formula and manually calculate the monthly amount payable, a loan calculator is more effective and time saving.

Business loan EMI formula example:
P= ₹10 lakh, r = 15% p.a., n = 36 months (3 years)
Here r = 15/12/100 = 0.0125E= P x r x (1+r)^n / [(1+r)^n-1]
E+ 1000000 x 0.0125 x (1+0.0125)36 / (1+0.0125)36 – 1
EMI = ₹34,665
Interest payable = ₹2,47,951
Total = ₹12, 47, 952

As can be understood, calculating the EMI manually can be tedious, time-consuming and prone to manual errors. That’s why it’s recommended to use a business loan EMI calculator for calculating how much EMIs you will have to repay.

EMI components – Principal and interest paid

From the example shared above, it can be seen that the total EMI paid comprises of the interest and principal amount.

As such, any change in any variable will impact the overall business loan EMI that you will have to pay. For instance, though the interest rates are governed by the RBI, there’s minor variance in the interest charged by different lending institutions, whether loans are taken through banks or NBFCs or even government MSME loans.

Explained below in detail in the breakup of all components of a business loan EMI and how your EMIs are calculated.

P = ₹10,00,000

R(r) = 15% p.a. i.e. 15/12/100 = 0.0125

N(n) = 36 months i.e., 3 years

Principal (₹) Interest rate % p.a. Tenure (months) EMI (₹) Total interest (₹) Total amount paid back (₹)
1000000 15 36 34, 665 2,47,952 12,47,952

Here, over a period of 36 months, you repay ₹34,665 every month to the bank. By the end of the tenure, you repay ₹12, 47,952 of which ₹10 lakh is the principal amount you had borrowed and ₹2,47,952 is the interest you pay.

Now, we will understand how the EMI amount changes when either of the variables i.e., r or n changes.

Scenario 1: Change in rate of interest

Principal (₹) Interest rate % p.a. Tenure (months) EMI (₹) Total interest (₹) Total amount paid back (₹)
1000000 15 36 34, 665 2,47,952 12,47,952
12 36 33,214 1,95,715 11,95,715
18 36 36,152 3,01,486 13,01,486

This is a fairly simple scenario to understand – there is no change in the loan amount borrowed or the tenure. Only the rate of interest changes and accordingly the EMI, total interest paid and overall amount payable.

As such, the lower your loan rate of interest (%) the lesser the EMI and other components. Always negotiate your loan offer to lower your interest rates.

Scenario 2: Change in tenure

Principal (₹) Interest rate % p.a. Tenure (months) EMI (₹) Total interest (₹) Total amount paid back (₹)
1000000 15 36 34, 665 2,47,952 12,47,952
15 24 48,487 1,63,680 11,63,680
15 48 27,831 3,35,876 13,35,876

In the next scenario, we keep the interest rate fixed at 15% p.a. but change the tenure to 24-36-48 months respectively. Again, as can be seen, the lower the tenure the higher the monthly EMIs but lower the total interest paid and overall amount paid.

From the above example of a business loan EMI, as a borrower therefore, it is practical to take a short-term business loan against a long term one.

Scenario 3: Change in loan amount i.e., principal borrowed

Principal (₹) Interest rate % p.a. Tenure (months) EMI (₹) Total interest (₹) Total amount paid back (₹)
1000000 15 36 34, 665 2,47,952 12,47,952
800000 15 36 27,732 1,98,361 9,98,361
1200000 15 36 41,598 2,97,542 14,97,542

As is obvious, the higher the loan amount, the greater is the EMI, interest and the overall amount paid. It is therefore recommended to ask for a loan amount that is required and not more or less. This will ensure that your business operations are not affected and you are not burdened with repayment worries.

Also, do check for pre-payment options and terms to ensure that there are no charges if you are able to repay the loan before time.

Business loan repayment schedule: Understanding how it works

Now that you understand how to calculate business loan EMI using the formula and the components that affect the EMI amount, let’s take a look at the loan repayment schedule structure.

We will refer to our earlier EMI example:

Principal (₹) Interest rate % p.a. Tenure (months) EMI (₹) Total interest (₹) Total amount paid back (₹)
1000000 15 36 34, 665 2,47,952 12,47,952

Few things to take note of here:

  • The EMI you repay every month, i.e., ₹34,665 consists of the principal and interest
  • Towards the begging of the tenure, the majority of the sum is the interest
  • As the tenure proceeds and the interest amount is covered, the EMI comprises the more of the principal
  • This is done to ensure that lenders recover the interest first
  • This also gives room to borrowers to repay lumpsum after the lock-in period

Loan repayment schedule example*:

Year (starting May 2023) EMI (₹) Principal (₹) Interest (₹) Sum remaining (₹)
May 2023 2,77,323 1,85,278 92,045 8,14,722
2024 4,15,984 3,14,838 1,01,146 4,99,884
2025 4,15,984 3,65,450 50,534 1,34,434
2026 1,38,661 1,34,434 4,227 0

*For representation and example only. Borrowers are requested to check with the lender for the actual break-up of EMI details.

A more granular look at the calculation will show the following EMI split-up by months:

Month/Year EMI (₹) Principal (₹) Interest (₹) Sum remaining (₹)
May 2023 34,665 22,165 12,500 9,77,835
Sep 2023 34,665 23,295 11,371 8,86,368
Mar 2024 34,665 25,097 9,254 7,14,946
Nov 2024 34,665 27,719 6,946 5,27,950
May 2025 34,665 29,864 4,801 3,54,204
Sep 2025 34,665 31,386 3,279 2,30,966
Jan 2026 34,665 32,985 1,680 1,01,449
April 2026 34,665 34,237 428 0

*For representation only.

As can be seen from the above example, though the EMI remains the same throughout the tenure, the split changes over the 36 months duration. In May 2023 i.e., 1st month of EMI, the majority of the EMI amount is paid towards interest on bank loan, whereas in January 2026 i.e., 32nd month of EMI, the majority of the repayment amount is the principal borrowed.

Next steps: Planning a business loan EMI

As a next step here are the three things you can do:

  • Approach a bank or NBFC with your loan requirements. Prepare well and try to have answers to the questions lender will ask before approving business loans. There are online and offline options available today. If you avail business loans through Tata nexarc you can get a loan offer within 5 minutes. The process is online with minimum documentation and low interest rates to keep your loan EMI less.
  • Consider alternative options like availing an overdraft or MSME loan. Government loans usually come with low interest rates. You may also consider special loan schemes such as loan schemes for women entrepreneurs or loans via SIDBI.
  • Understand how loan EMIs are calculated and check how to reduce the interest rate and/or tenure. Collateral-free loans usually calls for higher interest rates as the risks are higher. Adding a collateral to your loan application or checking options for loan down payment can help to lower the interest rates and overall EMIs payable.

FAQs on business loan EMI calculator


Which is the best loan EMI calculator online?

Loan EMIs are calculated as per the EMI formula shared above. All online EMI calculators are programmed based on the formula. As such, you can use any online EMI calculator to calculate the EMIs you will have to pay. They will all show the same amount (marginal differences in numbers).

How accurate is an online EMI calculator?

Online EMI loan calculators are programmed based on the formula. As such they are accurate and can be relied upon completely. However, you can always visit a bank offline and ask for a break-up. Banks will use their proprietary EMI calculators and provide you with the EMI break-up which will be the same.

What is the 40% EMI rule?

The business finance rule is simple. It simply means that your EMI should not comprise of more than 40% of your income. For instance, if your income is ₹1 lakh, then your EMI should not exceed ₹40,000.

Also, remember this rule of EMI applies to your overall EMIs and not a single loan. That is, if you have an existing loan and are paying an EMI, the new loan EMI should not exceed the balance. So, if your existing EMI is ₹22,000 your new EMI should not exceed ₹18,000. Banks will take these into consideration before offering a business loan.