Frequently asked questions

Are secured loans better for business?

Secured loans come at a cheaper cost as compared to unsecured, and have lower processing fees. Many business owners keep their property/ equipment and go for an unsecured loan with higher costs and shorter duration, which is avoidable.

Your loan eligibility is arrived at based primarily on your income, business vintage, and the current financial obligations you have. A higher credit score would ensure you a lower interest rate, but a significantly lower credit score could stop the lender from giving you the loan.

Currently unsecured business loans have rates of interest (RoI) trending upwards of 14% pa. Professionals, however could get unsecured loans to enhance their practice at rates lower than this.

Forex transactions are done according to inter-bank rates (IBR) which is not accessible by normal means. The rates charged to customers are mostly a margin over the mid/avg rate for the day. Since it is virtually impossible for the customer to figure out the exact rate at which the transaction was executed, the actual cost remains a mystery.

On an average, a net saving of 5% to 8% can be made if you outsource your forex transaction banking to a treasury expert with access to live inter-bank rates and strong banker relationships.

Evidence suggests that on small to moderate volumes, banks charge anywhere between 0.3% to 1.3% (Rs. 0.25 to 1.00 per USD) as commission from their customers for forex conversions.

Better managed funds/ portfolios generate consistent alpha (excess return over the benchmark) at lower risk levels. Risk is normally estimated by calculating the standard deviation of returns, and a higher Sharpe Ratio indicates better risk adjusted return.

Although equity is risky as compared to fixed income, in a low-interest regime, one could focus on "Yield-portfolios" to enhance their income. Higher dividends are distributed by companies with good cash flows and lower re-investment of capital.

Debt funds are subject to taxes but the dividend or interests received from these funds are tax free in the hands of investors. This is a big advantage when compared with investment in fixed deposits which is subject to TDS (if it is more than Rs10,000) and is taxed at a marginal rate. Further debt funds are taxed at 20 per cent with indexation when the funds units are held for three years or more before being sold.

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