Author
LoansJagat Team
Read Time
4 Min
27 Jun 2025
How To Use A Business Loan To Cut Operational Costs By 30%?
Sejal owns a mid-sized printing business. Her monthly sales are around ₹8 lakh. Her outdated machines caused frequent breakdowns. Also, they were consuming too much power. She decided to take a ₹10 lakh business loan at 14% interest for 3 years and upgraded her machinery.
In just 3 months, her electricity bill was reduced by ₹18,000 per month, and she saved another ₹17,000 on labour. Her total savings came close to ₹35,000 every month. This is nearly 26% of her previous operational costs.
For many business owners like you, managing daily expenses is a constant concern. In this blog, we will understand how similar steps can help other businesses reduce costs by up to 30%.
1. Invest In Modern Equipment
If you are using outdated machines or manual processes then they can increase your long-term costs. As they consume more power, need frequent maintenance, and depend on labour.
Benefits of upgrading:
- It reduces electricity bills.
- It lowers labour costs due to automation.
- It improves production speed and output.
- There will be less downtime due to breakdowns.
You can upgrade machines by using a business loan. This will help you save every month while keeping output high.
Example:
Expense | Before Upgrade (₹) | After Upgrade (₹) | Monthly Saving (₹) |
Power | 45,000 | 30,000 | 15,000 |
Labour (3 operators) | 60,000 | 40,000 | 20,000 |
Maintenance & Repairs | 10,000 | 3,000 | 7,000 |
Total | 1,15,000 | 73,000 | 42,000 |
2. Consolidate Costly Loans
If your business is paying high-interest credit card dues or short-term loans then your outflows might be more than necessary. If you take a business loan with a lower interest rate then it will help you clear all dues and reduce total monthly payments.
Why consolidate?
- One EMI instead of multiple payments
- Better cash flow
- Reduced interest burden
- Simpler record keeping
An example showing before and after loan consolidation for a firm:
Loan Type | Amount (₹) | Rate (%) | Annual Interest (₹) |
Credit Card | 1,50,000 | 36 | 54,000 |
Business Overdraft | 2,00,000 | 18 | 36,000 |
Personal Loan | 1,50,000 | 15 | 22,500 |
Total Before | - | - | 1,12,500 |
New Business Loan | 5,00,000 | 13 | 65,000 |
Annual Saving | - | - | 47,500 |
3. Automate Accounting And Admin Tasks
Are you still using manual registers or Excel for billing, stock, or payroll? You should switch to cloud-based software as it can cut costs and reduce human errors.
What can be automated:
- Invoicing and reminders
- GST and tax filings
- Payroll and reimbursements
- Stock updates and reports
Your one-time investment of ₹50,000 to ₹75,000 in automation tools using loan funds can recover its cost in less than a year.
Example:
Activity | Manual (₹) | Digital (₹) | Monthly Saving (₹) |
Accountant or Clerk Fee | 20,000 | 12,000 | 8,000 |
Paper & Print | 5,000 | 1,500 | 3,500 |
Storage & Filing | 3,000 | 1,000 | 2,000 |
Total | 28,000 | 14,500 | 13,500 |
4. Purchase Raw Material In Bulk
If you usually buy materials in small lots due to cash flow issues then you might be paying higher prices. If you take a business loan then it will give you the liquidity to buy in bulk at discounted rates.
Why bulk buying helps:
- Lower per-unit cost
- Fewer delivery charges
- Ability to negotiate better terms with suppliers
A loan will give you upfront capital to buy more, spend less, and increase profit margins. An example of showing comparison between the cost of weekly and bulk purchases:
Purchase Type | Price Per Unit (₹) | Units | Raw Material Cost (₹) | Delivery Charges (₹) | Total (₹) |
Weekly | 110 | 400 | 44,000 | 2,000 | 46,000 |
Bulk Monthly | 95 | 400 | 38,000 | 1,000 | 39,000 |
Saving | - | - | - | - | 7,000 |
5. Relocate Or Renovate Your Workspace
It is possible that your current premises might be causing hidden losses:
- Higher rent
- Wasted space
- Frequent power cuts
- Damaged inventory due to poor storage
A loan can help you shift to a better location or improve your current setup.
What to consider:
- Lower rent in another area.
- Installing solar panels for energy savings.
- Redesigning space to reduce product damage.
Over time, these changes can significantly reduce your cost and improve business efficiency.
Example:
Expense Head | Old Premises (₹) | New Premises (₹) | Monthly Saving (₹) |
Rent | 80,000 | 55,000 | 25,000 |
Generator Fuel | 12,000 | 4,000 | 8,000 |
Inventory Loss | 5,000 | 1,000 | 4,000 |
Total | 97,000 | 60,000 | 37,000 |
Final Thoughts
You might know that you cannot run a business without unavoidable costs. But with proper usage of funds you can reduce many of these. A well-planned business loan can help you:
- Upgrade
- Consolidate
- Digitise
- Buy better
- Relocate
It can easily lead to savings of 20% to even 30% on your monthly operational expenses. Whether you are a manufacturer, wholesaler, or service provider, don’t just use loans for expansion. Use them to improve how you operate.
FAQs
1. Is it better to get a secured loan for machinery?
Yes, secured loans often come with lower interest.
2. How do I ensure my EMI doesn’t strain cash flow?
Choose longer tenure or step-up repayment plans.
3. Can I use the loan amount for rent deposits?
Yes, as long as it's for business purposes.
4. What loan tenure is best if I want quick savings?
3 to 5 years is ideal for most cost-reduction loans.
About the Author
LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
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