Business loans
How Business Loan EMI Is Calculated: Formula, Examples and Tables
Quick answer
Your EMI is P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan amount, r is the monthly interest rate and n is the number of months. For example, a ₹10 lakh business loan at 14% a year for 3 years has an EMI of ₹34,178, and you pay ₹2,30,395 in total interest.
On this page
Work out your own EMI
Move the sliders for amount, rate and tenure to see your EMI, total interest, how each EMI splits and a year-by-year schedule.
The business loan EMI formula
EMI (equated monthly instalment) is the fixed amount you pay every month. Each EMI covers that month's interest plus part of the principal. Banks and NBFCs calculate it with the same standard formula:
EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]
- P Loan amount (principal)
- r Monthly interest rate = annual rate ÷ 12 ÷ 100
- n Number of monthly instalments (tenure in months)
Worked example, step by step
₹10 lakh business loan at 14% a year for 3 years:
- Monthly rate
r = 14 ÷ 12 ÷ 100 = 0.011667 - Number of months
n = 3 × 12 = 36 - Compounding factor
(1 + 0.011667)³⁶ = 1.518 - Put it together
10,00,000 × 0.011667 × 1.518 ÷ 0.518 = ₹34,178 - Total cost ₹34,178 × 36 = ₹12,30,395, so total interest is ₹2,30,395.
In Excel or Google Sheets, =PMT(14%/12, 36, -1000000) gives the same answer.
Business loan EMI tables
EMI on ₹10 lakh by tenure (at 14%)
| Tenure | Monthly EMI | Total interest |
|---|---|---|
| 2 years | ₹48,013 | ₹1,52,309 |
| 3 years | ₹34,178 | ₹2,30,395 |
| 5 years | ₹23,268 | ₹3,96,095 |
A longer tenure lowers your EMI but raises total interest: stretching from 3 to 5 years cuts the EMI by about ₹10,900 but costs ₹1.66 lakh more in interest.
EMI on ₹10 lakh by interest rate (3 years)
| Rate | Monthly EMI | Total interest |
|---|---|---|
| 10% | ₹32,267 | ₹1,61,619 |
| 12% | ₹33,214 | ₹1,95,715 |
| 14% | ₹34,178 | ₹2,30,395 |
| 16% | ₹35,157 | ₹2,65,653 |
| 18% | ₹36,152 | ₹3,01,486 |
| 20% | ₹37,164 | ₹3,37,889 |
Every 2 points adds roughly ₹1,000 a month and ₹35,000 over 3 years on ₹10 lakh. See what lenders charge in business loan interest rates by lender.
EMI by loan amount (14%)
| Loan | 2 years | 3 years | 5 years |
|---|---|---|---|
| ₹5 lakh | ₹24,006 | ₹17,089 | ₹11,634 |
| ₹10 lakh | ₹48,013 | ₹34,178 | ₹23,268 |
| ₹25 lakh | ₹1,20,032 | ₹85,444 | ₹58,171 |
| ₹50 lakh | ₹2,40,064 | ₹1,70,888 | ₹1,16,341 |
All tables use a reducing balance and an illustrative 14% rate unless stated.
Why most of your early EMIs go to interest
Interest is charged on the outstanding balance, which is highest at the start. On the ₹10 lakh example:
First EMI
₹11,667 to interest
And ₹22,511 to principal.
Year 1 vs year 3
₹1,21,974 → ₹29,480
Interest paid in year 1 vs year 3.
That's why prepaying early saves the most, and why your balance falls slowly at first. The EMI calculator shows the split for every month of your own loan.
Flat rate vs reducing balance: the trap to avoid
Some lenders and dealers quote a flat rate, where interest is charged on the full loan amount for the whole tenure, even as you repay. It sounds cheaper than it is.
"10% flat" on ₹10 lakh, 3 years
EMI ₹36,111
Interest = ₹10 lakh × 10% × 3 = ₹3 lakh.
The same EMI on a reducing balance
≈ 17.9% a year
That's the real annual rate you're paying.
How prepayment cuts your interest
Say you pay an extra ₹2 lakh on the ₹10 lakh loan after 12 EMIs, when ₹7,11,843 is still outstanding. You have two choices:
Keep the same EMI
Close 7 months sooner
And save about ₹54,379 in interest.
Lower the EMI instead
New EMI ₹24,575
For the remaining 24 months, down from ₹34,178.
Keeping the EMI saves more interest; lowering it frees up cash flow. Check prepayment charges first. For floating-rate business loans to individuals and micro and small enterprises sanctioned from 1 January 2026, most banks can't charge any. Many unsecured business loans are fixed-rate, though, and can carry charges of up to 4% to 5%.
What else changes your EMI
- Floating-rate resets: when RBI moves the repo rate, linked loans reset. After the 0.25-point hike on 7 October 2026, a ₹25 lakh, 5-year loan at 10.5% rises by about ₹310 a month.
- Fees aren't in the EMI: processing fees (often 1% to 2% at banks, up to about 4.7% at some NBFCs) come off your disbursal, which raises your real cost.
- Moratoriums: interest during a repayment holiday is usually added to the balance, so the EMI that follows is higher.
- Overdraft and cash credit: these have no EMI. You pay interest only on what you use each day.
How much EMI can your business afford?
Lenders look at whether your business cash flow covers all your EMIs with room to spare. A common test is the debt service coverage ratio (DSCR): monthly cash available for repayment ÷ total monthly EMIs. Many lenders look for about 1.25 or more.
Example: if your business generates ₹60,000 a month after expenses, total EMIs of up to about ₹48,000 keep you at 1.25. That's enough for the ₹10 lakh, 3-year loan above (₹34,178), with room for another small loan. Our loan eligibility calculator checks DSCR and EMI load for you.
Know your EMI? See what you can borrow
Tell us about your business and a Kredway loan advisor calls you back to talk through the loan size your cash flow supports and which lenders fit. We advise; we don't lend.
Frequently asked questions
How is business loan EMI calculated?
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r the monthly rate (annual rate ÷ 12 ÷ 100) and n the number of months. ₹10 lakh at 14% for 3 years gives ₹34,178.
Does my EMI change during the loan?
On a fixed-rate loan, no. On a floating-rate loan it can change when the lender's benchmark rate changes, or the lender may adjust your tenure instead.
Is the processing fee included in the EMI?
No. It's usually deducted from the amount disbursed. It still adds to your cost, which is why you should compare the APR in the Key Fact Statement.
How can I reduce my business loan EMI?
Choose a longer tenure, negotiate a lower rate, borrow less, or prepay part of the loan and ask the lender to reduce the EMI. A longer tenure lowers the EMI but raises total interest.
Is it better to reduce EMI or tenure after prepaying?
Reducing the tenure saves more interest. Reducing the EMI helps if your monthly cash flow is tight.
Why is a flat rate more expensive than it looks?
Flat interest is charged on the full loan for the whole tenure, even as you repay. A 10% flat rate over 3 years costs about the same as an 18% reducing-balance rate.
Business loan EMI kaise calculate kare?
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1). P loan amount hai, r mahine ka rate (saal ka rate ÷ 12 ÷ 100) aur n mahinon ki sankhya. Jaise ₹10 lakh, 14% par 3 saal ke liye EMI ₹34,178 banti hai. Kredway ke EMI calculator mein apne numbers daalkar turant dekhein.
Sources
- EMI, amortisation, flat-rate and prepayment figures are calculated by Kredway with the standard reducing-balance formula.
- SCC Online: RBI Pre-payment Charges on Loans Directions, 2025
- SCC Online: RBI hikes repo rate to 5.50% (October 2026)
- Bajaj Finance: business loan charges