|Interest Rates||15 to 27% *|
|Loan Tenure||up to 3 years|
|Eligibility Criteria||>₹90,000 turn over for 3 Months|
|Loan Amount||₹50,000 – ₹2crore|
|Installments||Flexible Monthly / Bi-weekly|
What is Working Capital Loan?
Working Capital Loan is a type of funding or credit required by several startups, enterprises or companies to manage their day-to-day business operations and to manage business cash flow. Working capital loans are short-term loans to fulfill instant business requirements and can not be used to buy long-term assets or for investment purposes.
The banking sector in the country is quite competent in providing different types of loans to its customers for their various financial needs. Considering their needs, working capital loans were introduced to fulfill the financial requirements of companies, business owners, for MSME, for startup and self-employed professionals.
Working capital loan is a type of business finance that is availed majorly by companies doing businesses related to manufacturing, providing services, retailing, stocking, distribution, restaurants, supermarkets, multi-brand outlets, departmental stores, etc.
Eligibility Criteria for Working Capital Loan
- Age Criteria: Min. 18 years & Max. 65 years
- Business Vintage, Annual Turnover and work experience to be defined by lender
- Good CIBIL score and repayment history
- No previous loan default with any financial institution
- Duly filled application form with passport sized photographs
- Self-written business plan
- KYC documents of applicant and co-applicants that include Passport, Aadhar card, Voter’s ID card, Driving License, PAN Card and Utility Bills (Telephone, Electricity)
- Last 1 years’ bank statement
- Partnership deed, if applicable
- Certificate of registration and incorporation
- Any other document required by lender
Benefits of Working Capital Loan
1. Short-tenured Loan
The repayment period of Working Capital Loan is as low as 9-12 months making it a loan of relatively shorter duration. Borrower does not have to plan for long-term EMIs if availing this loan. Working capital loans to new businesses is offered in form of short-term loan.
2. Handle Financial Difficulties
Even if your business is flourishing and has lots of fixed assets, it is not entirely unthinkable to find your business landing in a financial crisis at times. In situations like this, nothing can be better than a working capital loan. Under the best of circumstances, poor working capital leads to financial pressure on a company, increased borrowing, and late payments to creditors – all of which result in a lower credit rating. A lower credit rating means banks charge a higher interest rate for any money borrowed. Applying and using a working capital loan when you need it most will keep you in your business when shortages occur.
3. No Collateral Required
Unlike most other unsecured business (or even personal) loans, no security or collateral is required to avail a working capital loan from a bank or Non-banking Financial Company (NBFC). If you have a good credit history, then you may become eligible for unsecured working capital loans. The bank will check and verify your credit history and if satisfied, will give you the loan with a fixed tenure to pay it back.
4. Helps in Lean Periods
If you are running a seasonal business which witnessed high sales during a particular season only, you probably face risks and challenges that create problems in your annual revenues, then you should go for a working capital loan. These loans can help you to overcome the blows otherwise created by the lack of adequate spending potential.
5. Spend at Your Discretion
Working capital loans come with no riders or restrictions on how the funds are used. However, they do instruct you to use the money for valid needs only. This is to ensure that your business does not start to depend solely on credit to manage expenses. Even so, you can use the money for all your business requirements and nobody can question this.
Frequently Asked Questions
What are the 4 main components of working capital?
The four major components of working capital include cash, inventory, receivables and accounts payable.