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Working Capital Finance

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    Working Capital Finance in India

    To adapt to the growing world one needs to manage every aspect of the business effectively. Many times it becomes difficult to manage finances. And thus, there comes the need for funds. Small or medium enterprises face these issues more frequently. Here, working capital finance helps in such a scenario. Working Capital is the difference between the company’s current assets and its current liability. This type of finance helps one in short-term operations like purchasing raw materials, undertaking operational payments, etc. Hence, the Working Capital Finance in India allows one to run its operations smoothly and efficiently.


    1. It helps with boosting the availability of cash in the business and improves business sales. Working capital finance is useful in providing effective cash management to businesses.
    2. The processing of this facility is quick with minimum documentation.
    3. It can opt-in both secured and unsecured ways depending upon the availability of collateral. Perhaps, companies having no collateral can avail this facility in unsecured funding but pertaining to creditworthy CIBIL score. However, companies with high credit ratings can avail of convenient loan tenures.
    4. Generally, the rate of interest is high in unsecured working capital, But We at Terkar Capital arrange a reasonable cost of borrowing for our clients.

    Understand the Process of working capital finance from a case study 

    Cycle for Working Capital Finance

    The WC Cycle refers to the period taken to convert the company’s net current assets and liabilities into cash. The time gap between production and selling of goods into the market is high. The working capital cycle varies from industry to industry. The higher the turnaround time to convert the raw material to cash, the higher will be the requirement of working capital. All these factors finally hamper the working cycle of the company. Hence, working capital finance is the most easily available product in such a situation. There are 4 main elements in the WC cycle — Cash, Accounts Payable (creditors), Accounts Receivable (debtors), and Stock.

    Advantages of Secured Working Capital

    • Interest will be applicable only for the used fund.
    • No fixed obligations of repayment as like Term Loans.
    • Multiple working capital debt instruments are available, you can opt the one which is most suitable for you. 
    • You can raise the funds through working capital by pleading or not pleading with the property. In short, raising the funds without security is possible provided by the credit rating of the company. 
    • There are many good sources of funding which can give the exposure without pleading the property provided your credit rating must be good. 
    • Industry-specific debt instruments – which suits your business to grow.

    Working Capital Instruments

    Below is the list of a few of our WC instruments:

    Working capital finance in India is taken to finance the everyday operations of a business. These finances are not used to buy long-term assets or investments. Instead, used to provide the finance that covers a company’s short-term operational needs.

    Overdraft facility is the financial instrument allowed by the bank for their customers. It enables you to withdraw money from your bank account even if you do not have such a favorable credit balance. One cannot exceed the limit given by the bank. The bank charges extra fees if you extend the limit sanctioned by the bank.

    Bill Discounting is a method of trading where the seller gets the amount in advance before the maturity of the bill at a smaller amount than its actual, i.e., at a discounted rate. The reasons for discounting can be the requirement of working capital requirement, paying dues, and many more. In simple words, Bill Discounting can also be termed as Short Term Loans against a bill as security.

    A cash credit facility enables customers to use the amount specified by the lender and pay interest only on the used amount. The amount cannot exceed the sanctioned amount. Here, Drawing Power (DP) is an important concept for (CC) facilities available from banks and financial institutions. Drawing power is the limit up to which a firm or company can withdraw from the working capital limit sanctioned.

    The formula for Calculating Drawing Power-

    Sr. no




    (in ‘000)



        (in ‘000)

    1.Insured stock


    2.(Less) : Creditors


    3.Paid Stock


    4.(Less) : 25% margin on paid stock



    Total (A)



    6.(Less) : Debtors > 90 days


    7.Debtors allowed for DP


    8.(Less) : Margin 40% on above



        Total (B)

    DP  =Total (A) + Total (B) 


    Hence, the above borrower has a DP of Rs. 60, 00, 000.

    Factoring is the financial instrument or debtor finance. In this, the seller sells its accounts receivable to a third party called ‘factor’ at a discount. There are three parties involved in such a transaction: a seller, a buyer, and a factoring company. In simple words, it is selling unpaid invoices for the requirement of instant cash. This helps the company in its short-term cash needs and manages money immediately. The factoring company pays 80-90% of the invoice amount immediately, which solves the problem of working capital.

    Letter of Credit Discounting is a guarantee given by the bank to pay the seller for the buyer’s obligation, in case a buyer fails to make the payment. LC discounting takes away the risk and gives assurance to the seller for the funds. 

    Bank Guarantee is issued by the lender to the debtor to cover its liability in case of default by him. In case of the failure of payment by the debtor, the bank will pay on his behalf.

    The process to avail of secured working capital

    Why Choose Terkar Capital?

    If you’re looking for an effortless and fast working capital financing process, Terkar Capital is the best place for you. As one of the top facilitators of working capital finance in India, we offer you financial support to help your short-term business needs. We provide expert guidance for the right selection of the working capital product, a quick turnaround time, and provide the best ROIs for you. Our expert customer support will provide you with complete information on everything you need to know about the loans as well as help you with anything throughout the tenure.

    For More Details Please contact our Experts

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