Term loan or working capital? Matching the instrument to the need

The most expensive loan is often the wrong loan. Funding a machine purchase out of your cash credit starves daily operations of oxygen; funding a seasonal inventory build-up with a term loan means paying interest on money you only needed for a quarter. Both mistakes are common, and both are quietly expensive.

Sound structuring maps every rupee to its purpose. Term loans serve assets that repay over years. Working capital serves the operating cycle that turns over in months. Letters of credit and bank guarantees serve trade. Project finance serves ventures with their own repayment logic. Each instrument is priced and covenanted for its job — using it for another job is where costs leak.

A periodic review of the capital structure usually reveals the same pattern: limits in the wrong buckets, tenors mismatched to cash cycles, and pricing negotiated years ago never revisited. Get the mapping right, and the same turnover supports more growth at a lower overall cost — often without borrowing a single additional rupee.