6 Key Tips to Reduce the EMI Burden on Your Business Loan

Whether you want to expand your business or manage overhead costs, opting for a business loan is a smart solution. It provides funds to sustain your business operations and can help in a financial crisis.

However, there are many criteria to consider before availing the loan. When choosing a business loan, a smart way to proceed is to choose a lender providing affordable interest rates. Low-interest rates translate to lower monthly instalments, or EMIs, on your business loan.

You can use an EMI calculator for a business loan and check your monthly instalments well in advance. This also helps you choose a suitable lender based on your financial requirements. Simply follow certain tips and strategies to get a lower EMI plan for your business loan and manage your finances in a better way.

Continue reading to understand a few strategies to minimise your EMI burden.

Research Interest Rates Properly

It is extremely important to research interest rates properly when looking for a business loan. This is because lenders offer varying interest rates based on certain factors. Moreover, lenders offer various loan options, each with unique terms and rates.

While you can decide on the loan type after assessing your requirements, using an EMI calculator for a business loan is likely your best way to find a deal. This online calculator also helps you compute your interest outgo, helping you plan your monthly finances better.

So, when researching rates, start by comparing different offers. To do so, you have to input just three parameters:

●The loan amount you want to borrow

●Repayment tenure

●Applicable interest rate

Enter the required values and get the EMI amount instantly, along with the amortisation schedule. You should also analyse interest rates by comparing EMIs across lenders; you can choose the one that best fits your requirements.

Opting for low-interest rates is the key point to reducing your EMI burden. However, note that interest rates vary according to eligibility parameters set by lenders. Once you meet the required eligibility for a business loan set by a specific lender, you can proceed to apply for the loan.

Remember that opting for the right loan tenure can decrease interest rates as well. The goal is to prove to lenders that you can manage payments without risking defaults.

Refinance Your Existing Credit Options

Refinancing refers to availing a new loan to repay your existing credit. This could be an excellent option if your existing loans have high-interest rates and high EMIs. You can combine all your outstanding debts into a single loan at affordable interest rates.

This helps minimise the burden of the higher EMIs you were paying previously. This is precisely the reason you need to use an EMI calculator for a business loan, as it helps you compute your monthly instalments with ease.

With the help of refinancing, your EMI amount reduces, making it easier to repay the loan and handle business expenses.

Borrow Funds Only When Needed

When availing a business loan, it is crucial to borrow optimally. Borrowing more than required cuts into your working capital and may even affect your profits. This is why you need to know your needs, and it should be justifiable.

To evaluate the total amount required, consider the following pointers:

●Understand your business needs

●Track your inflows and outflows

●Do a cost-benefit analysis

The benefit of borrowing optimally is that it helps ensure EMIs stay cost-effectively. Availing a larger sanction than required only adds to your EMI outgo, making it difficult to keep up with payments. Also, by assessing your need for funding, you may even decide to borrow a lesser amount.

Choose a Longer Repayment Tenure

As mentioned, when you opt for a more extended loan repayment period, your loan EMIs can reduce. This is because your total repayment amount gets distributed equally across the whole loan tenure. So, the instalment payable each month is smaller as well.

However, it is crucial to know that even though a longer repayment tenure can reduce your EMIs, it increases your interest. This is because you pay interest for a longer period of time, and hence the cost of borrowing increases.

So, you must choose this option only after considering the financial situation of your business. If your finances do not allow you to pay higher EMIs every month, you can go for the prepayment option to reduce EMIs.

An EMI calculator for a business loan is the best way to check your EMIs and choose a tenure, depending on your financial conditions.

Check for Prepayment Options

If your lender and the loan scheme allow prepayment options on your business loan, you can use it to reduce your EMIs significantly. Prepayment of your business loan refers to paying a part of your business loan or the total loan before the due date.

Your loan amount decreases when you prepay your business loan or part of it. This will result in lower EMIs for the remaining tenure of your loan. Hence, prepayment is a smart strategy through which you can reduce your EMI and the total interest payable.

Make Extra EMI Payments During Profitable Times

If the company is doing well financially, it is a good idea to devote funds toward extra EMI payments for your business loan. Paying an extra EMI whenever possible can provide benefits such as:

●Shorter tenure of business loan

●Reduction in equated monthly instalments (EMIs)

With banks and NBFCs providing flexible repayment options to encourage borrowing, business owners find it easy to fulfil their financial requirements whenever needed. However, it is crucial to make sure that the business has surplus funds to make the extra instalment payment without compromising on other important business obligations and payments.

Finding the right financial resources for your business needs is an important decision which requires your attention. The burden of high EMIs can create financial troubles for your business, affecting the day-to-day business activities, working capital deficits and routine operations.

Choosing a business loan with lower monthly instalments can be a great strategy to secure capital for your business without compromising your financial stability. Similar to any financial decision, before getting a business loan, you must do your due diligence. Check your eligibility for a business loan and plan to secure your business’ financial health.