# Do you know how a business loan calculator works? Read here

There is no need to mention or describe the importance of a business loan calculator for a business owner. For commercial progress, every company needs a business loan, but it needs to calculate the monthly and the total cost of the loan. After all, paying an instalment every month affects the business finances. With the other expenses in the queue, it is necessary to work on the cost of a loan. To calculate that cost, a business loan calculator is necessary.

## What is a business loan calculator?

A business loan calculator is like any other loan calculator that gives an estimation of the total cost of a business. It also tells about the monthly instalments. Instalment is calculated in three ways, loan amount, loan tenure and the interest rate charged on loan.

## How does a business loan calculator work?

The functioning is simple, but you should know the basics. The cost that is associated with the loan is called interest. By paying instalments, you repay part of the loan and thus reduce some amount from instalments after every month. Hence, every month, interest is charged on the balance amount.

With the help of an instalment calculator, you get to know the amount you can repay every month without any hassle. With this, it is possible to find out whether you can pay an instalment or not. This will help in making a better finance plan during the tenure of the loan.

## How can you calculate business loan instalment?

There are three parameters you need to provide to calculate the instalment. Do not worry. It is a simple process, and you can complete the task in a minute.

• Loan amount
• Interest rate
• Loan tenure

All these are entered into the calculator, and then the calculator gives the monthly instalment information. Using these three different combinations will give almost the exact repayment amount that is right for you.

## The formula to calculate repayments

Here is the simple formula that every business loan calculator uses to generate results. You are sure to understand it in a short while.

Repayment  = Principal Amount x Interest Rate x (1 + Interest Rate) Loan Tenure / ((1 + Interest Rate) Loan Tenure (1))

• I is Instalment, the amount that you need to pay every month.
• P denotes the amount you want to borrow from the lender.
• R is the interest rate charged on a loan, which is calculated monthly instead of annually.
• N is about the tenure, and it is in months. For example, if your loan tenure is 5 years, then N that is tenure is 6o months.

Instalment is directly related to the amount borrowed and interest rate. The monthly repayment is always higher for higher amounts borrowed, and for less borrowed amounts, the instalment is always lower. In simple words, longer tenure means the instalment will be small in amount. Shorter tenure means the amount is larger for the instalment. Low instalment can increase the loan tenure, i.e. a smaller amount can be repaid every month. However, the tenure of the loan will be longer. It also depends on your trading position and ability to pay.

## Advantages of using a business loan calculator

You surely have the idea on this aspect. Some of the advantages of using an instalment calculator or business loan calculator are –

Easy to operate

The one using the calculator just needs to enter the three types of values, and the value of repayment will come. Repayment calculators also allow you to enter the value even if it is separate, making it easier for the worker. The advancement in financial tools after the emergence of FinTech is much faster now. The calculators generate results in a few seconds. There is no scarcity of free tools to calculate to total and monthly cost of any financial product.

### No Calculation Mistake

Instalment calculators ensure that there is no wrong calculation so that the time taken for correction is saved. A small mistake can cause a big loss, and that is something that should not happen. Every business owner should be alert about the cost of the debts. But thanks to the smart technology that has improved a lot the way we use money. Do not worry. Just mention your numbers and get to know the right amount.

### Saves Time

Of course, time-saving is a big feature of calculators. A business has many loans, and the financial needs are urgent sometimes. In such cases, if a business wants to borrow money urgently, it needs to work on the cost part quickly. Apart from providing information like interest rate and instalment payment, the borrower can apply for the loan through login on the lender website.

### Cost-Effective

There are no middlemen involved in helping the borrower take a decision on instalment payment. The borrower can do it himself without spending any money. The free of cost financial tools and calculators make the work easy. It is much easier now to work on the cost of the loans because things are extremely predictable now. There was a time when you had to depend on the lingering procedures of the mainstream lenders. Now the business owners enjoy self-reliance because they can compare loans, find out the cost, and take an immediate decision.

Conclusion

The above points explain that due to the presence of the business loan calculator, today, the finance industry has become customer-oriented. Nothing is hidden now, and also, the comparison between the loan deals has become simpler. It is the reason that it has become predictable for business owners to work on debt management and manage expenses better.