Tips & Tricks To Use A Business Loan Calculator Effectively

The rise of the internet and fintech institutions adopting online banking technologies have given impetus to the development of online Business Loan calculators. But how helpful are these calculators in providing accurate results that are close to the current offerings and market scenario? How do you ensure that the outcomes you see on the online Business Loan calculator are the same as those offered by the fintech institute’s loan officer? 

Let’s discuss the tips and tricks necessary to use these Business Loan calculators so that outcomes match accurately to the loan products offered.

What is a Business Loan Calculator?

Business Loan Calculator is a subcategory of loan repayment calculators provided by numerous fintech and banking institutions on their online websites. It helps calculate the EMI amount that will be repaid to the financial institution based on your input. The input parameters are designed based on the existing loan offers made by the fintech institution where you wish to apply for the loan. Also, how much interest has been paid is computed.

Formula Used for Business Loan Calculators

The formula used for Business Loan Calculators is:

  • EMI = (L * r * (1 + r) N * f) / ((1 + r) N * f – 1)


  • L = Loan amount
  • r = Interest rate per year
  • N = The number of years within which the loan has to be repaid
  • f = The frequency with which the loan amount has to be paid

Business Loans are available in various forms like capital loans, term loans, MSME Loans, Business Loans, etc. The loans provided can be secured or unsecured. Some loans with higher amounts require collateral or security like property, equipment, etc. In case of any default, the financial partner has the right to sell the collateral and recover the loan amount with interest.

Therefore, to avoid such situations, they need to know about the applicant’s borrowing capability & current financial condition. Simultaneously, the borrower can check the interest amount to be repaid. The Business Loan calculator will help business owners calculate the instalment amount and the interest to be paid.

How to Use the Business Loan Calculator?

Interested applicants should follow the below steps to calculate the monthly instalment using the online Business Loan Calculator.

  • Step 1: Finalise the amount you need as funding from the Business Loan, which must be the principal amount.
  • Step 2: Check the interest rate applicable for a particular Business Loan offered by the lender where you wish to apply.
  • Step 3: Determine the monthly interest. Ex: if the interest rate is an annual interest rate of 9% and the same has to be paid monthly, then the interest rate would be 0.75% per month.
  • Step 4: Multiply the initial loan amount by the interest rate calculated in step 3.
  • Step 5: Use the compound interest formula to apply the discounting effect (the denominator).
  • Step 6: The final result displayed will be the instalment amount needed to be paid periodically.

Let’s Take An Example:

Company A is operating in a two-wheeler business and is currently facing a cash crunch due to machine breakdown and spare part shortages. SNS wants to borrow ₹10 Lakh for 10 years. A fintech company is ready to offer a Working Capital Loan as this customer has been associated with it for many years and has maintained a good credit score. The interest rate is fixed at 10.5% per annum, which shall be compounded monthly.


  • Step 1: Principal loan amount needed, L = ₹10 Lakh
  • Step 2: Annual interest rate= 10.5%
  • Step 3: Converted monthly interest rate, r = 0.5%
  • Step 4: L * r = 10,00,000 * 0.00875 = ₹8,750
  • Step 5: L * r * (1 + r) N * f) = 8,750 x (1.00875)120 = 8,750 x 2.84463= 24,890.5
  • Step 6: ((1 + r) N * f – 1) = 2.84463 -1 =1.84463
  • Step 7: We apply the formula and calculate the monthly instalment

 Upon applying the formula – L * r * (1 + r) N * f)/ ((1 + r) N * f – 1) = ₹13,493 for a period of 120 months for full repayment

  • The total amount to be paid = ₹13,493 x 120 = ₹16,19,160
  • The total interest payable is = ₹16,19,160- ₹ 10, 00, 00= ₹6,19,160


A Business Loan calculator is a helpful online tool for borrowers to assess how much instalment they might have to pay. As these are free online tools, you can change the parameters and adjust the loan amount, tenure, interest rate, etc. You choose a loan amount that you can easily manage without sacrificing your current lifestyle and avoid defaulting in the future due to a lack of income.


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