SMEs require regular access to funds to meet their working capital needs and to expand their businesses. However, because of the unorganised nature of their business, traditional finance institutions such as banks and non-banking finance companies (NBFC) are guardedabout lending to such small organisations. Most small businesses have traditionally been run as family businesses, and so their business operations and financial records frequently lack transparency.
Post the implementation of GST, however, we can expect the scenario to change for the better. For one, most businesses that have remained beyond the tax net for years would now come within its fold. Further, with input tax credit available across different stages in the supply chain, the taxation instances will reduce significantly, and this would encourage small businesses to become more transparent about their operations. Once the business processes become transparent, the avenues for getting funds to accelerate business growth will only increase. Moreover, access to formal channels of funding will reduce the dependence of small businesses on local moneylenders whogenerally charge exorbitant interest rates from such businesses. Increased transparency and competition will also lead to a reduction in interest rates for various loan products offered.
Although businesses frequently need to rely on loans for their operations, they cannot afford to rest easy post approval of their loan amount. They also need to monitor their debts constantly so that funds are utilised in a controlled and predictable manner.
We offer five effective inputs on how best you can use term loan calculators to manage your loans:
Compute your liabilities using the term loan calculator
The entry of new-age FinTech companies in the small business loan market has remodelled the lending process largely. Such lenders use the latest technology tools to offer short-term loans at the most competitive rates.Their easy-to-use term loan calculatoralso enables you to check your liability over the loan repayment period.
One of the most popular terms related to business loans is equated monthly instalments (EMI). Most lenders provide a term loan EMI calculator to calculate monthly liability for a short-term loan. The term loan interest calculator provides details about the two components that form parts of your EMI – Principal and Interest on the loan. By employing a term loan calculator, you can check how much you have repaid as the principal, and how much as the interest portion. In the initial period of the loan, the principal component is lesser than the interest component. The term loan interest calculator demonstrateshow in subsequent months your principal amount will increase, while the interest component will begin to fall.
Plan cash flows better using a term loan EMI calculator
Having access to a term loan calculator helps small businesses understand their cash flow needs better. They can easily figure out how much of the principal amount or the interest is pending, and how much has actually been paid. The term loan interest calculator regularly alerts you to the urgency of repaying the loan amount and to reduce costs related to interest repayment. The EMI to be paid by a business depends on the amount of loan taken, the period for which it has been taken and the interest rate offered by the lender.
Under the term loan calculator, the formula for manually calculating the EMI is:
E= Equated monthly instalment (the total amount you willbepaying back as loan instalment each month)
P = Principal
r = Rate of interest per month
n = Duration of loan(in months)
Use variousterm loan calculators tocalculate and compare EMIs
You could use the formula given above to calculate your monthly loan liability or you could use one of the several term loan interest calculators available online. The online tools are always easier to use,because in a mere three or four steps they help you calculate your term loan liability for each month. However, before beginning, you need to prepare all details such as the term loan amount, the repayment period and the interest applicable. Do remember to add the loan-processing fee too, and set a duration that you would be comfortable with for repaying the loan. Once you key in these details, the term loan calculator will advise you on the EMI applicable. You could also compare EMIs offered by different lenders using such term loan EMI calculatorsin order todetermine the best business loan on offer.
Do quick calculations and visualise loan scenarios using a term loan calculator
One of the key advantages of using a term loan EMI calculator is that you can feed different loan amounts, time durations and interest rates, and compare the loan liability at a single place and glance. This hardly takes any time and you could even extrapolate this data into visually appealing graphs, pie charts and other illustrations for any business presentations if required. You can play around with different loan parameters and quickly check how it impacts your EMI liability. The term loan calculator also lets you compare the loan offerings from different lenders in a more comprehensible manner, and thus helps you choose the best loan for your business.
Choose the right loan product using a term loan calculator
Another key advantage ofusing a term loan EMI calculator for checking your loan liability is that you get to know the pros and cons in terms of costs associated with the different loan products. For instance, you can instantly find out which loan product has been designed for your specific business need and how much benefit you get in terms of the interest rate offered. The term loan calculator lets you avoid all marketing gimmicks and enables you to check the genuine and precise benefits offered. Based on your assessment, you may decide to opt or withdraw from a particular loan product.
The SME business loan market offers several options to business owners based on their varying business needs. Therefore, a term loan EMI calculator is the accurate tool for determining the right loan product.