Short answer
A business loan EMI uses the same formula as any loan: EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1]. A ₹10 lakh business loan at 14% for 5 years has an EMI of ₹23,268 and total interest of ₹3,96,095.
Because interest is a business expense, it cuts your tax. For a company on the 22% regime, that ₹3,96,095 of interest saves about ₹99,689 in tax, so the real cost is about ₹2,96,406, or roughly 10.5% a year after tax.
How to use this business loan calculator
- Pick the loan typeSearch for term loan, Mudra, CGTMSE, machinery or NBFC loan. The calculator fills in a typical rate, tenure and fee, and shows any amount limit.
- Enter the amount, rate and tenureType the figures or drag the sliders. Switch the tenure to months for short working capital loans.
- Choose your business typePick company, LLP, firm or proprietor so the calculator can show the tax saved on interest and the real cost after tax.
- Add a fee, moratorium or prepaymentOpen the panels to include the processing fee and GST credit, an interest-only moratorium, or a lump-sum prepayment.
- Check how much you can borrowUse the second tab to find the largest loan your profits support at the DSCR your lender expects.
Business loan types and typical rates, October 2026
Indicative ranges for MSMEs with a good credit score and at least two years of filed returns. Your lender's offer depends on your credit score, turnover, collateral and banking history.
| Loan type | Typical rate | Max tenure | Processing fee | Collateral |
|---|---|---|---|---|
| Term loan from a bank (secured) | 9%–13% | 10 years | 0.25%–1% | Property, plant or other security |
| Machinery or equipment loan | 9.5%–14% | 7 years | 0.5%–1.5% | The machine itself, sometimes extra |
| Working capital term loan | 9.5%–14% | 5 years | 0.25%–1% | Stock, debtors or property |
| Loan against property for business | 9%–13% | 15 years | 0.5%–2% | Residential or commercial property |
| Commercial vehicle loan | 9.5%–16% | 7 years | 0.5%–2% | The vehicle |
| Collateral-free MSME loan (CGTMSE) | 9.5%–14% | 7 years | 0.5%–1% + guarantee fee | None, guaranteed by CGTMSE (up to ₹10 crore) |
| Mudra Shishu (up to ₹50,000) | 8.5%–12% | 5 years | Nil | None |
| Mudra Kishore (₹50,000 to ₹5 lakh) | 9%–13% | 5 years | Nil | None |
| Mudra Tarun (₹5 lakh to ₹10 lakh) | 9%–13% | 7 years | Up to 0.5% | None |
| Mudra Tarun Plus (₹10 lakh to ₹20 lakh) | 9%–13% | 7 years | Up to 0.5% | None |
| Unsecured business loan (NBFC or fintech) | 14%–26% | 5 years | 2%–4% | None |
| Startup or new business loan | 10%–22% | 7 years | 1%–3% | Varies; CGTMSE or promoter security |
Mudra loan limits and EMIs
Mudra loans under the Pradhan Mantri Mudra Yojana are for non-farm micro businesses: traders, shops, service providers and small manufacturers. Banks, small finance banks, NBFCs and MFIs give them without collateral. The Tarun Plus category, announced in the July 2024 Budget, is open to borrowers who have taken and repaid a Tarun loan.
| Category | Loan amount | EMI at 10%, 5 years | Total interest |
|---|---|---|---|
| Shishu | Up to ₹50,000 | ₹1,062 on ₹50,000 | ₹13,741 |
| Kishore | ₹50,000 to ₹5 lakh | ₹10,624 on ₹5 lakh | ₹1,37,411 |
| Tarun | ₹5 lakh to ₹10 lakh | ₹21,247 on ₹10 lakh | ₹2,74,823 |
| Tarun Plus | ₹10 lakh to ₹20 lakh | ₹42,494 on ₹20 lakh | ₹5,49,645 |
Mudra rates are set by each lender and usually sit a little above its base lending rate. Ask for the rate in writing in the Key Fact Statement.
Collateral-free loans under CGTMSE
The Credit Guarantee Fund Trust for Micro and Small Enterprises guarantees loans that banks and NBFCs give without collateral or a third-party guarantee. From 1 April 2025, the limit is ₹10 crore per borrower, up from ₹5 crore.
- The guarantee covers 75% to 85% of the default amount, with higher cover for women entrepreneurs and some other groups.
- An annual guarantee fee is charged on the loan, and most lenders pass it on to you. Ask for it in the sanction letter, because it adds to your cost every year.
- You need Udyam registration as a micro or small enterprise to qualify.
Business loan EMI per ₹1 lakh
Multiply by your loan amount in lakh. For ₹15 lakh at 14% for 5 years, the EMI is 15 × ₹2,327 = ₹34,905.
| Rate | 1 yr | 2 yrs | 3 yrs | 4 yrs | 5 yrs | 7 yrs | 10 yrs |
|---|---|---|---|---|---|---|---|
| 9% | ₹8,745 | ₹4,568 | ₹3,180 | ₹2,489 | ₹2,076 | ₹1,609 | ₹1,267 |
| 10% | ₹8,792 | ₹4,614 | ₹3,227 | ₹2,536 | ₹2,125 | ₹1,660 | ₹1,322 |
| 11% | ₹8,838 | ₹4,661 | ₹3,274 | ₹2,585 | ₹2,174 | ₹1,712 | ₹1,378 |
| 12% | ₹8,885 | ₹4,707 | ₹3,321 | ₹2,633 | ₹2,224 | ₹1,765 | ₹1,435 |
| 13% | ₹8,932 | ₹4,754 | ₹3,369 | ₹2,683 | ₹2,275 | ₹1,819 | ₹1,493 |
| 14% | ₹8,979 | ₹4,801 | ₹3,418 | ₹2,733 | ₹2,327 | ₹1,874 | ₹1,553 |
| 16% | ₹9,073 | ₹4,896 | ₹3,516 | ₹2,834 | ₹2,432 | ₹1,986 | ₹1,675 |
| 18% | ₹9,168 | ₹4,992 | ₹3,615 | ₹2,937 | ₹2,539 | ₹2,102 | ₹1,802 |
| 20% | ₹9,263 | ₹5,090 | ₹3,716 | ₹3,043 | ₹2,649 | ₹2,221 | ₹1,933 |
| 22% | ₹9,359 | ₹5,188 | ₹3,819 | ₹3,151 | ₹2,762 | ₹2,343 | ₹2,067 |
| 24% | ₹9,456 | ₹5,287 | ₹3,923 | ₹3,260 | ₹2,877 | ₹2,468 | ₹2,205 |
Tax on business loan interest, GST and TDS
- Interest is deductible as a business expense when the loan is used for the business. This works in every tax regime, for companies, LLPs, firms and proprietors.
- Principal is not deductible. If the loan buys a machine or vehicle, you claim depreciation on the asset instead.
- Interest to banks and NBFCs is allowed only in the year you actually pay it, not when it falls due (earlier Section 43B). Unpaid interest at year-end is added back to your profit.
- GST on the processing fee is 18%. A GST-registered business can usually claim it as input tax credit, so the GST is not a real cost. Interest itself carries no GST.
- TDS on interest: no TDS is needed on interest paid to a bank. Interest paid to an NBFC or a lender other than a bank can attract TDS under Section 393 (earlier Section 194A), so check before you pay.
Total interest is ₹3,96,095. A company on the 22% regime saves about ₹99,689 in tax, so the cost after tax is ₹2,96,406. An LLP at 31.2% saves about ₹1,23,582.
Effective rate after tax: about 10.5% for the company and 9.6% for the LLP.
How much can your business borrow? DSCR explained
Banks size a business loan on the debt service coverage ratio (DSCR). It compares the cash your business earns with what it must pay on all its loans in a year.
DSCR = (Net profit after tax + Depreciation + Interest) ÷ (Interest + Principal repayments)
Most banks want a DSCR of at least 1.25, and are more comfortable at 1.5 or above. Unsecured lenders often ask for 2.
Cash available for loan payments is ₹17 lakh a year. At a DSCR of 1.5, total loan payments can be up to ₹11,33,333 a year. Existing EMIs of ₹25,000 a month use ₹3 lakh, leaving ₹8,33,333 a year, or ₹69,444 a month.
At 12% for 5 years, that EMI supports a new loan of about ₹31.2 lakh.
Moratorium: what it costs
Term loans for a new unit or machinery often start with a moratorium of 3 to 12 months, while the business sets up. You usually pay only the interest during this time, and EMIs start after it.
Without a moratorium, the EMI is ₹43,485 and total interest is ₹6,09,091.
With a 6-month moratorium inside the same 5 years, you pay ₹18,333 a month in interest for 6 months, then an EMI of ₹47,123 for 54 months. Total interest rises to ₹6,54,641.
The moratorium eases early cash flow but adds about ₹45,550 in interest.
Documents lenders ask for
- Income-tax returns for the last 2 to 3 years, with computation of income
- Audited or CA-certified balance sheet and profit and loss account
- GST returns and the GST registration certificate
- Bank statements for the last 6 to 12 months
- Udyam registration, PAN, KYC of promoters and the business's incorporation documents
- Projected financials and a project report for term loans and larger limits
Late or missing returns are the most common reason MSME loans get delayed. Filing on time for two years before you apply makes a bigger difference than any single document.
Frequently asked questions
How is a business loan EMI calculated?
EMI = P × r × (1 + r)^n ÷ [(1 + r)^n − 1], where P is the loan amount, r is the monthly rate (yearly rate ÷ 12 ÷ 100) and n is the tenure in months. A ₹10 lakh business loan at 14% for 5 years has an EMI of ₹23,268.
What is the EMI on a ₹20 lakh business loan?
At 11% for 5 years, the EMI is ₹43,485 and total interest is ₹6,09,091. At 16% for the same 5 years, the EMI rises to ₹48,636.
Is business loan interest tax deductible?
Yes. Interest on a loan used for the business is a deductible business expense for companies, LLPs, firms and proprietors, in either tax regime. Interest owed to a bank or NBFC is allowed only in the year it is actually paid. The principal repayment is not deductible.
What is the Mudra loan limit in 2026?
Up to ₹20 lakh. Shishu covers up to ₹50,000, Kishore ₹50,000 to ₹5 lakh, Tarun ₹5 lakh to ₹10 lakh, and Tarun Plus ₹10 lakh to ₹20 lakh for borrowers who have repaid a Tarun loan.
Can I get a business loan without collateral?
Yes. Mudra loans up to ₹20 lakh need no collateral, and loans covered by CGTMSE can go up to ₹10 crore for micro and small enterprises from 1 April 2025. NBFCs also give unsecured business loans, usually at 14% to 26%.
What DSCR do banks need for a business loan?
Most banks want a DSCR of at least 1.25, and prefer 1.5 or more. DSCR is net profit after tax plus depreciation and interest, divided by the interest and principal you pay on all loans in a year.
Can I claim GST credit on the loan processing fee?
Usually yes. Banks and NBFCs charge 18% GST on the processing fee, and a GST-registered business can claim it as input tax credit when the loan is for the business. No GST applies on the interest itself.
Is TDS deducted on interest paid on a business loan?
Not on interest paid to a bank. Interest paid to an NBFC or another non-bank lender can attract TDS under Section 393 of the Income-tax Act, 2025 (earlier Section 194A), so confirm with the lender and your CA before paying.
Does a moratorium increase the cost of a business loan?
Yes, slightly. On ₹20 lakh at 11% over 5 years, a 6-month interest-only moratorium raises total interest from ₹6,09,091 to ₹6,54,641, because principal is repaid later.
Can I prepay a business loan without a penalty?
For floating-rate loans sanctioned or renewed from 1 January 2026, RBI does not let most lenders charge a prepayment penalty to individuals and micro and small enterprises, within limits it sets. Fixed-rate and older loans can still carry a charge, so check your sanction letter.
Which documents do I need for a business loan?
Usually ITRs for 2 to 3 years, audited or CA-certified financial statements, GST returns, 6 to 12 months of bank statements, Udyam registration and KYC. Term loans and larger limits also need projected financials.
Can I download the business loan schedule?
Yes. Below the schedule, use Download PDF or Download Excel, grouped by financial year. Copy share link creates a link that opens the calculator with your figures filled in, which you can send to a partner or your CA.