How the Right Loan Product Helped Save Crores

How the Right Loan Product Helped Save Crores : CA Vikas Jain

Introduction

Choosing the right loan product is crucial for business owners looking to optimize costs and maximize profitability. A wrong financial decision can lead to unnecessary interest costs, while the right choice can save crores. In this blog, we will explore a real-life case study of a business owner who saved over ?15 crores by selecting the right loan product. Read on to learn how smart loan selection can significantly impact your business growth.

Real Case Study: How a Business Owner Saved 15 Crores ?

Business Overview

Our client owned a business in the oxygen-nitrogen and industrial gases sector, requiring a total capital investment of ?30 crores. He had already decided to take a loan of ?20 crores but was unsure about the best financing option.

Initial Loan Choice: Loan Against Property (LAP)

The client initially opted for a Loan Against Property (LAP) with an interest rate of 9%. However, this was not the most cost-effective financing option. After a financial review, we explored alternative funding strategies.

Finding a Cost-Effective Loan Solution

Step 1: Exploring Export Benefits

We assessed the client’s business and found that he was already operating in Bangkok and had export potential. This insight opened up new opportunities for cost savings.

Step 2: Availing Import Duty Benefits

By obtaining a DGFT (Directorate General of Foreign Trade) license, the client qualified for import duty exemptions, saving nearly ?9 crores on equipment costs.

Step 3: Switching to Foreign Currency Term Loan (FCTL)

Instead of LAP at 9% interest, we advised the client to opt for a Foreign Currency Term Loan (FCTL) at just 4% interest. This significantly reduced the financing cost.

Total Savings Breakdown

• Import Duty Savings: 9 Crores
• Interest Rate Reduction (From 9% to 4%)
• Long-Term Interest Savings for 7 Years
• Total Savings: ?15 Crores!

Additional Government Benefits

Beyond the loan restructuring, we also helped the client apply for State Government Capital Subsidies, further reducing costs by providing:

Interest Subsidy on Plant & Machinery

Reduction in Overall Project Cost

As a result, the client’s project became more cost-effective, increasing profitability and cash flow stability.

Key Takeaways for Business Owners

• Choosing the right loan product is essential for cost savings.
• Utilizing Export-Import and Government Schemes can significantly reduce costs.
• Foreign Currency Loans can lower interest rates compared to traditional loans.
• State Government Subsidies can further reduce project expenses.

FAQs

1. What is a Foreign Currency Term Loan (FCTL)?

A Foreign Currency Term Loan is a loan availed in foreign currency (USD, EUR, etc.), offering lower interest rates than domestic loans. It is beneficial for businesses with export revenue.

2. How does a DGFT license help in cost savings?

A DGFT license allows businesses to avail duty exemptions on imported goods, reducing overall capital expenditure.

3. Can any business apply for a Foreign Currency Loan?

Not all businesses qualify. Companies with foreign trade operations (export/import) are generally eligible.

4. How do I check if my business qualifies for government subsidies?

Government subsidies vary by state and industry. Consulting a financial expert or checking official government portals can help determine eligibility.

5. Where can I get financial consultation for my business?

You can contact FinanceSeva.com for expert financial guidance on loans, subsidies, and cost optimization strategies.

Conclusion

Making the right financing decisions can save crores and increase business profitability. By understanding your funding options and utilizing government benefits, you can optimize costs and ensure long-term success. Need expert advice? Contact FinanceSeva.com today for smart financial solutions!