An EMI (equated monthly instalment) is the fixed monthly payment that repays a loan over its term. EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is principal, r the monthly interest rate, and n the number of months. A ₹20 lakh loan at 14% over 5 years costs about ₹46,500 a month — and roughly ₹7.9 lakh in total interest. The EMI is a fixed cost that raises your break-even every month, so borrow against what the outlet can actually repay, not what the bank will offer.
What an EMI is, in plain terms
Fit-outs, equipment and expansions are often funded by a business loan, repaid as an EMI — a fixed monthly instalment that covers both interest and a slice of principal, sized so the loan clears exactly at the end of its term. Early instalments are mostly interest; later ones mostly principal, but the monthly figure stays constant, which is what makes it plannable.
The EMI formula and what interest really adds
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the tenure in months.
A ₹20,00,000 loan at 14% annual interest over 5 years (60 months) works out to an EMI of roughly ₹46,500. Over the full term you repay about ₹27.9 lakh — meaning nearly ₹7.9 lakh is interest on top of the ₹20 lakh borrowed. That total-interest number, not the monthly EMI, is the true cost of the loan, and a longer tenure lowers the EMI but raises the total interest.
How the EMI hits your break-even
An EMI is a fixed cost — it does not care how many covers you served. That means it lands straight in your break-even calculation and raises the sales you must do every month just to stand still. A ₹46,500 EMI is roughly ₹46,500 of extra monthly sales you now need at break-even (more, once you account for margin). Before you borrow, add the EMI to your fixed costs and re-run break-even — if the site could not comfortably carry it, the loan is too big or the tenure too short.
Borrowing sensibly
Banks lend against what they think you can repay; you should borrow against what the outlet can repay from operations, which is usually less. A few guardrails: keep the EMI to a share of expected profit that survives a slow season; prefer a tenure that keeps the EMI comfortable without dragging total interest up needlessly; and never fund recurring operating costs with a term loan. Match the loan life to the asset life — five years of EMI for equipment that lasts eight makes sense; five years of EMI for working capital does not.
Business Loan / EMI Calculator
Standard reducing-balance EMI calculation for a setup or expansion loan. See monthly EMI, total payment and total interest.
Step by step
Work out a loan EMI and whether you can carry it.
- Gather the three inputs. Principal, annual interest rate, and tenure in months.
- Apply the EMI formula. EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), with r the monthly rate.
- Check the total interest. Multiply EMI by the number of months and subtract the principal to see the true cost of borrowing.
- Add the EMI to break-even. Fold the EMI into fixed costs and re-run break-even to confirm the outlet can carry it from operations.
Frequently asked questions
How is a business loan EMI calculated?
EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the tenure in months. A ₹20 lakh loan at 14% over 5 years is about ₹46,500 a month.
Does a longer loan tenure cost more?
A longer tenure lowers the monthly EMI but raises the total interest you pay over the life of the loan. The EMI is easier month to month, but you pay more overall — which is why total interest, not just the EMI, is the number to watch.
How much should a restaurant borrow?
Borrow against what the outlet can repay from operations, not the maximum the bank offers. Keep the EMI to a share of expected profit that survives a slow season, match the loan tenure to the asset’s life, and never fund recurring operating costs with a term loan.
Keep reading
Break-even for a New Restaurant: The Number to Know Before You Sign the Lease
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Kitchen Equipment ROI: Buy It, Lease It, or Skip It
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