Daily Repayment Loans for Small Business: How EDI Loans Work

A daily repayment loan is a short-term business loan that you repay in small instalments every day, called an equated daily instalment (EDI), usually collected from your bank account or straight from your daily UPI and card sales. Some NBFCs offer these loans to kirana stores, chemists, restaurants and other small merchants because the repayment matches the way their cash comes in. They are quick and need little paperwork, but the effective annual cost is often much higher than it looks, so you should always convert the daily offer into an annual rate before you sign.

Key takeaways

• EDI loans are typically short (a few months to about a year) and sized on your daily sales.
• Collection is usually by daily auto-debit or by deducting a share of your UPI or card settlements.
• Lenders often quote a flat monthly charge; the true annualised rate can be two to three times higher.
• To compare fairly, find the daily rate and multiply it by the number of instalments in a year (365 if every day).
• Ask about Sunday and holiday collections, missed-day charges and prepayment before you accept.

What is a daily repayment (EDI) loan?

An EDI loan works like a normal EMI loan cut into smaller, more frequent pieces. Instead of paying ₹18,000 once a month, you might pay about ₹600 every day. The loan amount is usually decided by your average daily sales or bank credits, and the tenure is short, commonly between 90 and 365 days.

These loans exist because many small businesses are paid daily. A tea stall, a mobile recharge shop or a vegetable wholesaler collects cash and UPI payments every day but may not have a large lump sum on the 5th of every month. Paying a little each day can feel lighter than one big EMI. ClickPe itself started out connecting small merchants to daily-repayment credit, and we have seen both how useful and how expensive these loans can be.

How the daily instalment is collected

The collection method affects your cash flow as much as the amount. There are three common set-ups:

Collection method	How it works	What to watch
Daily auto-debit (e-NACH or e-mandate)	A fixed amount is debited from your current or savings account every day	A low balance causes a bounce and possible charges
Split from UPI or card settlements	A fixed amount or a percentage of each day's digital sales is held back before the rest reaches you	You receive less than you sold each day
Collection from a linked account or wallet	Sales land in an account the lender can debit before you withdraw	Read who controls the account and for how long

Whichever method is used, RBI's Digital Lending Directions, 2025 require repayments on digital loans to go directly into the regulated lender's bank account, not through a pass-through account of a Lending Service Provider or any other third party. If someone asks you to repay into a personal account or an unrelated company, stop and verify.

Also note when collections happen. Some lenders collect every calendar day including Sundays and holidays; others collect only on working days. This changes how many instalments you pay a year, and therefore the true cost.

Who these loans suit

Daily repayment loans tend to suit businesses with:

• Steady daily sales, such as grocery, pharmacy, dairy, bakery or quick-service food.
• High digital collections, so the lender can see and deduct from UPI or card settlements.
• A short, specific need, such as festive stock, a bulk purchase discount or a repair.
• Limited paperwork, for example no audited financials, where a bank term loan is hard to get.

They suit less well if your income is lumpy (for example B2B invoices paid every 60 days), seasonal, or if you would be borrowing to repay another loan. For a side-by-side look at the two structures, read our comparison of monthly vs daily loan repayments.

What a daily loan really costs: a worked example

Daily loans are often quoted as a flat charge, such as "2% per month". A flat rate is charged on the original loan amount for the whole tenure, even though you repay part of the principal every day. That makes the quoted figure look much lower than the true rate.

Meena runs a kirana store in Surat. She is offered ₹1,00,000 for six months at "2% per month flat", repaid over 180 daily instalments.

1. Total charge: 2% × 6 months × ₹1,00,000 = ₹12,000.
2. Total repayable: ₹1,12,000.
3. Daily instalment: ₹1,12,000 ÷ 180 = ₹622.22.

Now find the daily interest rate that makes 180 payments of ₹622.22 equal to ₹1,00,000 today. Using the standard reducing-balance formula with daily periods, EDI = P·r·(1+r)^n / ((1+r)^n − 1), the rate that fits is about 0.128% per day.

Measure	Result
Quoted rate	2% a month flat (looks like 24% a year)
Daily rate	about 0.128%
Annualised rate (daily rate × 365)	about 46.6% a year
Same, if ₹2,000 processing fee is deducted upfront (₹98,000 received)	about 55.1% a year
Compounded effective annual rate (no fee)	about 59.4% a year

The annualised rate is the figure to compare with a monthly EMI loan's interest rate or APR. Notice how fast the principal falls: after 90 days Meena owes only about ₹52,900, yet the flat charge was calculated on the full ₹1,00,000 for all six months.

For comparison, the same ₹1,00,000 as a six-month EMI loan at an illustrative 24% a year on a reducing balance would have an EMI of about ₹17,853 and total interest of about ₹7,115, compared with ₹12,000 on the daily loan. Even if the same ₹12,000 charge were collected in six monthly instalments, the annualised rate would be about 40%. Daily collection makes a flat charge more expensive, not less, because you return the money sooner.

These figures are illustrative. Your offer will differ, which is why you should run your own numbers.

How to convert any daily offer into an annual rate

You do not need to be a finance expert. A spreadsheet does it in one line.

1. Note the amount you actually receive in your account (after any processing fee).
2. Note the daily instalment and the number of instalments.
3. In Excel or Google Sheets, type =RATE(number_of_instalments, -daily_instalment, amount_received). For Meena's loan: =RATE(180, -622.22, 100000) gives about 0.128%.
4. Multiply by the number of instalments in a year: 365 if collected every day, about 313 if only six days a week.
5. Compare this annualised figure with the APR in the lender's Key Fact Statement (KFS). RBI requires a KFS showing the APR for all retail and MSME term loans, so if the two are far apart, ask why.

You can also check a monthly alternative on the business loan EMI calculator.

Pros and cons of daily repayment loans

Advantages	Disadvantages
Fast approval, often based on bank or UPI data	Annualised cost is typically high
Small, frequent instalments match daily cash flow	Every day's sales are partly committed
Short tenure means you are out of debt quickly	Easy to roll into repeat loans or top-ups
Light documentation	A slow week can cause several missed instalments at once
Builds a repayment record with the lender	Fees for bounces can add up quickly

Questions to ask before you sign

1. Is the rate flat or on a reducing balance? What is the APR in the KFS?
2. Are instalments collected on Sundays and public holidays?
3. What happens if a day's debit fails? RBI rules allow reasonable penal charges for non-compliance, but not penal interest added to your rate or interest charged on those charges.
4. Can I prepay or close early, and is there a charge? Prepayment rules depend on whether the loan is fixed or floating rate and on the lender type, so check what the KFS says.
5. If I take a top-up, will the old loan's unpaid charge be added to the new one?
6. Who is the actual lender? Check the NBFC's name in the KFS and on its website's list of Lending Service Providers.

You can compare daily and monthly options from RBI-regulated lending partners on ClickPe's business loan page. If daily sales are most of your income, our guide to business loans for kirana and retail shops covers other options too, and merchant cash advance vs term loan explains the percentage-of-sales variant.

When a daily loan makes sense

A daily loan can be worth its cost when it earns you more than it costs. If Meena uses the ₹1,00,000 to buy Diwali stock that she sells at a 20% margin twice over in two months, the cost of the loan may be well covered. If she uses it to pay another lender's EMI, it only adds to her burden. Borrow for a clear use with a known payback, and take the smallest amount that does the job.

FAQ

What does EDI mean in a business loan?

EDI stands for equated daily instalment. It is a fixed amount you repay every day (or every working day) until the loan and its interest are cleared. It works like an EMI, but with daily rather than monthly periods.

Are daily repayment loans more expensive than monthly EMI loans?

Usually, yes. Lenders price them higher because the loans are short, unsecured and given with light paperwork, and flat-rate quotes hide the true cost. Convert the offer into an annualised rate and compare it with the APR of a monthly loan before deciding.

Is the money deducted from my UPI collections automatically?

It depends on the lender's set-up. Some deduct a fixed amount or percentage from your UPI or card settlements before paying you, while others use a daily auto-debit on your bank account. The KFS and loan agreement should state exactly how and when instalments are collected.

What happens if I miss a daily instalment?

The lender may levy a penal charge and try to collect the amount again the next day. Repeated misses are reported to credit bureaus and can lower your CIBIL score. If you expect a slow period, speak to the lender early about restructuring rather than letting debits fail.

Can I close a daily repayment loan early?

Most lenders allow early closure, but the charge depends on the lender and whether the loan is fixed or floating rate. Ask for the foreclosure amount in writing and check it against the KFS. With a flat-rate loan, confirm whether unearned interest is waived when you close early.