Lenders don't size a business loan around how much you want — they size it around how much you can safely repay alongside everything else you already owe. The core concept behind that decision is called FOIR, and understanding it tells you roughly what to expect before you even apply.
What FOIR means
FOIR — Fixed Obligation to Income Ratio — is the share of your monthly income that lenders allow to go toward all EMIs combined, existing and new. Most lenders cap this somewhere between 40% and 65%, depending on their risk appetite and your credit profile. A lower FOIR cap means a more conservative lender.
How eligibility is actually calculated
The process has two steps:
- Find your maximum affordable EMI: Monthly income × FOIR% − existing EMI obligations.
- Convert that EMI into a loan amount using the reducing-balance EMI formula in reverse, based on the interest rate and tenure the lender offers.
A worked example
Say your monthly business income is ₹1,50,000, you already pay ₹15,000/month toward existing loans, and the lender applies a 50% FOIR cap.
Maximum affordable EMI = (₹1,50,000 × 50%) − ₹15,000 = ₹60,000/month.
At 12% interest over 5 years (60 months), that ₹60,000 EMI supports a loan of roughly ₹26,97,000. Over a shorter 3-year tenure, the same EMI only supports about ₹18,06,000 — a longer tenure increases eligibility because each installment covers less principal.
What actually moves the number
- Existing EMIs subtract directly from what you can borrow — paying off a small existing loan before applying can meaningfully raise eligibility.
- Tenure has an outsized effect: a longer tenure raises eligibility but increases total interest paid, the same tradeoff as with any EMI-based loan.
- FOIR cap varies by lender and by your credit score — a strong credit history can get you a more generous FOIR cap and, in turn, higher eligibility for the same income.
This is a heuristic, not a lender's actual underwriting model — real eligibility also weighs credit score, business vintage, collateral, and lender-specific policy. Treat it as a realistic starting estimate, not a guaranteed offer.
Estimate your own eligibility
The Business Loan Eligibility Calculator runs this exact FOIR-based calculation for your income, obligations, and desired terms.