• Home
  • Business
  • How GST and Term Loan Calculators Work for a Businessman?

How GST and Term Loan Calculators Work for a Businessman?

In the last few years, India has witnessed its Small and Medium Enterprises (SME) flourish at a tremendous pace. Earmarked as a vital sector for nation financial growth, it alone generates employment for about 60 million individuals in India.

One of the most crucial factors that have contributed to giving SMEs the necessary boost to branch out successfully to various sectors in India is the easy availability of capital.

With digital advancements and better opportunities available aplenty, small-scale businessmen across the country have undertaken their own ventures.

So much so that according to data presented by the IBEF, SMEs account for about 40% of India’s total exports and 45% of its total industrial output.

Now, the foundation of any business, small or large, is to maintain a positive working capital ratio. Managing a fine balance between assets and liabilities is what keeps a business running efficiently.

A GST calculator is a crucial online financial tool that aids individuals in the endeavor to ascertain the assets and liabilities.

Importance of capital in a business

 

If a business is considered a piece of machinery, capital is the “oil” in this analogy that keeps it running smoothly.

The working capital ratio of a business is given by the proportion of a business’ current assets to its current liabilities and is a measure of its liquidity.

To keep a business running smoothly, it is imperative for its owner to ensure that the working capital ratio remains positive wherein there is an excess of the current assets over the current liabilities.

This can be done by utilizing tools like GST calculators to track the liabilities and assets currently under a business.

Now, if for any reason, the liabilities of a capital exceed its assets, a business can incur losses and essentially become bankrupt in the process.

Under such circumstances, individuals can avail of a term loan to infuse capital into their business and effectively keep their working capital ratio in check.

The easy availability of business loans from various financial institutions in India like Bajaj Finserv has now made it easier for individuals to infuse their business with working capital. These are unsecured advances that allow individuals to avail up to Rs.30 lakh to fund their businesses.

One of the liabilities that can arise in due course of availing these advances is an ensuing threat of falling into a debt trap. As is evidenced by a report published in India Today, which presents that India’s corporate debt can amount to a staggering $19 trillion.

To avoid this, businessmen can utilize online financial tools like the term loan calculator, to gauge their capability to repay the advance they avail and consequently avoid increasing their liabilities.

Benefits of utilizing online financial calculators

Online calculators like a GST calculator and business loan calculator allow businessmen to calculate liabilities of their businesses efficiently.

  • GST calculator –

With GST subsuming most indirect taxes levied by the government, it makes for the most important tax liability that a business incurs each year.

With the calculator to compute GST, businessmen can do away with the hassle of calculating their tax liabilities manually.

Following is the formula utilized by these calculators to present a taxpayer’s GST liability –

GST amount = (original cost X GST%)/100.

However, it is crucial for individuals to input the parameters in the calculator correctly to ensure that there are no mistakes in the GST calculation.

Apart from helping businessmen calculate their tax liability, a GST calculator also offers the following benefits –

  1. It helps individuals differentiate easily between CGST, SGST, and IGST.
  2. It helps save time while calculating GST payment.
  3. It eliminates the possibility of making human errors while computing GST.
  • Term loan calculator

Akin to the online calculator for the computation of GST, a term loan calculator allows individuals to calculate their repayment liability for the business loan they avail.

A business loan calculator utilizes the following formula to calculate the EMI –

EMI = P x r x (1 + r) ^ n / [(1 + r) ^ n – 1]

Where, P gives the principal amount borrowed, r gives the rate of interest, and n is the loan tenor (given monthly.)

Like the calculator for computing GST, a business loan calculator also allows individuals to remove any errors while calculating their EMI, and subsequently allows them to know the liability they will incur by availing the advance.

Using these online financial tools is imperative when it comes to ensuring that businessmen have a definitive account of the liabilities under their business. This, in turn, ensures that the business runs smoothly.