Online SME & MSME Loan EMI Calculator for Business Loans

MSME is the collective term for micro, medium and small enterprises, and there is a separate ministry for MSMEs within the government of India. MSMEs not only generate employment but account for 45% of the country’s manufacturing facilities and contribute 8% of the gross domestic Product (GDP) of the country. MSMEs have large export volumes and contribute 40% of the exports of the nation to other countries. MSMEs came into being with the formulation of the MSMED (micro, medium and small enterprises development act in 2006. Until then, MSMEs were mostly known as small and medium-scale industries, and the criteria for classifying industries into small and medium were also not clearly defined.

MSMEs have a regular need for loans, and there are several lenders available. The businesses can even try out the EMI calculator to first examine whether a loan and its calculated EMI are payable and fit into the monthly budget.

It is important to understand the different criteria on which micro, medium and small enterprises are classified to get an idea about the business loans they are eligible for. In addition to the criteria for classifying MSMEs by the MSMED act of 2006, a bill was introduced in 2018 that further classified MSMEs on the basis of their annual turnover. The criteria have been tabulated below as a ready reckoner.

The MSMEs have great potential for the economy of India. The 4.5 million MSMEs presently in India employ 120 million people, and both banks and financial institutions benefit from not only providing loans to these enterprises but from the cash generated from their turnover and sales.

The need for loans

MSMEs have a regular need for loans for the following purposes

1. Management and financing of working capital for a full cycle from raw material procurement to sales and despatch of finished products or services
2. Purchase and/or upgradation of machinery/ equipment
3. Investment in new technology, including software
4. Financing consultancy and hiring of experts

MSME loans are of the following types

Working capital loans can be further classified into

1. Cash credit loans – MSMEs can access a pre-approved credit limit for financing working capital
2. Bills discounting – Also known as invoice financing, MSMEs deposit their unpaid invoices and receive loans based on the net value of the unpaid invoices or bills. These loans have a short tenure, and the loan requires to be paid after customers have paid up against the invoices.
3. Bank guarantee – though MSME loans do not require any collateral, many banks offer loans on the basis of guarantees by third parties who promise to pay up in case the MSME is not able to repay the loan.
4. Letter of Credit – Popularly known as LC, banks offer loans to enterprises on the basis of a letter of credit in which banks pay the value of the invoice once the shipment is delivered.
5. Loans under the CGTMSE (Credit guarantee fund trust for medium and small enterprises) – This is a loan offered by the ministry of the MSME for new as well as existing MSMEs upto a value of Rs 1 crores and does not require any collateral.
6. Overdraft facility on current account – The current account of an MSME allows overdrafts upto a certain limit.
7. Short-term unsecured business loans – These are loans that are given for a maximum tenure of 3 years and allow enterprises financing for new expansion or diversification of their facilities.

Term Loans are the second broad category of MSME loans, and they are further classified into 

1. Secured term loans are loans provided for new projects, expansion of enterprises and other capital expenditure and are given against commercial or residential property collateral.
2. Commercial Loans for the purchase of commercial vehicles or construction equipment. These loans require the vehicles and construction equipment to be given as collateral.

The loans and how to get them

MSME loans are mostly business loans but with a difference in some facilities specially provided for MSME loans.

MSMEs must apply for business loans and have both their credit rating and their udyam registration.

Most of the site of lenders, including banks and financial institutions, have their own sites here. MSMEs can apply online for a business loan. One of the key features of the sites is the online loan EMI calculator, where MSMEs can determine the EMIs on the loan amount that they are eligible for those they are applying for.

Some of the benefits of the EMI calculator

An MSME loan EMI calculator is a popular app that allows applicants to try out various combinations of principal loan amounts, interest rates, and term of the loan. The program calculates and displays the EMI payable on the loan at the prevailing interest rate.

MSMEs can use the EMI calculator to try out different combinations of loan amounts. Tenures and interest to arrive at an affordable EMI and apply for the most suitable loan amount

MSMEs can plan their monthly budget by knowing the exact EMI amount based on the loan. Understanding the MSME loan interest rate is crucial for accurate budgeting. This helps in making informed decisions and managing cash flow effectively for sustainable growth.

For instance, if a business wishes to take a loan of Rs 5 lakhs at an interest of Starting from 1.25% per month for a tenure of 5 years and feeds these details into the EMI calculator, The program will show an EMI of Rs 11122 per month, and the total amount repayable on a loan of Rs 5 lakhs will be Rs 6.67 lakhs.

How to use the MSME loan EMI calculator

The procedure for using the EMI calculator of the MSME loan provider is very simple and does not require the applicant to log into the site.

The EMI calculator is an app within a site that can be clicked to open. Once opened, there are boxes where the applicant will need to enter the loan amount, the tenure and the interest rate.

Once these details have been entered, the “submit” button gets activated and will need to be clicked. The calculated EMI will show up on the screen.

Interested applicants can repeat this step repeatedly until they arrive at a suitable EMI. They can now use the loan amount and tenure and go ahead and apply for the loan.