Working Capital Loan Process (Case Study)
A business with strong sales but frequent cash flow gaps can struggle to meet daily expenses. This working capital case study highlights the process of how a company optimized its finances by securing a working capital loan. Through a structured working capital management case study with a solution, the business reduced its dependency on delayed receivables and maintained a steady cash flow.
To understand the working capital loan process, let’s learn about Rajan’s case study.
Working Capital Case Study
Rajan Patel is running an automobile part-manufacturing company, “Royal Motors Pvt Ltd”, situated in Mumbai and Pune. He deals in manufacturing and selling spare parts for vehicles. He has been in this business since 2013. His turnover, according to the financials of the previous year, is showing Rs 55 Cr.
Thus, being well-known in the automobile sector, he has goodwill in the market. Now he is thinking of expanding sales all over India. So, for that, he needs funds for manufacturing spare parts. Meanwhile, he has received a new order, and the funding requirement for such an order is Rs 13.4 Cr. Already, he has given his machinery for collateral. So, having no collateral, Rajan is worried about obtaining funds!!
As per his current need, he went to many lenders for assistance. The lenders were ready to give a loan, but against collateral only. So, Rajan was disappointed at getting no clues about getting funds. Searching for a financial advisor, he came across Terkar Capital. Hence, to secure financial assistance, he scheduled a meeting with Terkar Capital.
Financial Snapshot
Business Commencement year | 2013 |
Nature of Business | Manufacturing Company |
Company’s Turnover | 55 Cr |
The amount required for funds | Rs. 13.4 Cr |
Mortgage available | None |
Working Capital Loan
We met Rajan and had a thorough discussion about finances. We asked him to issue his company’s financials for analysis. So, our team inspected the financials and advised him to go for a Working Capital Loan. Let’s understand how Terkar Capital helps with the working capital loan process.
There are a few financial instruments available as follows.
- Bill Discounting
- Factoring
- Letter of Credit Discounting
- Cash Credit
- Overdraft Facility
- Bank Guarantee
While analyzing the financials, we decided to raise the funds through the instrument of the Cash Credit facility of working capital financing. Cash Credit is a facility offered by borrowers’ principal bankers. Whereby, he is sanctioned a particular amount as per Drawing Power (DP), which can be utilized for making his business payments. The banker sets a credit limit for withdrawing the amount, and the borrower cannot cross that specified limit. Thus, the best part is that the interest is charged only to the extent of the money used.
Financial Analysis
We discussed with his principal banker and communicated that Rajan could use the Cash Credit facility as per his drawing power, which was exposed to Rs 15 Cr. Rajan then withdrew the desired amount. He used the same to execute his order. So, Rajan benefited from the CC facility and was content with our service. Thus, from then onwards, Rajan became our regular client and consulted us all about his company’s finances.
Financial Instrument | Capital Finance-Cash Credit Facility |
Total time execution | 5 days |
CC Limit | Rs. 15 Cr |
Amount received | Rs. 13.5 Cr |
Customer service | 4.5/5 |
Terkar Capital's working capital loan process
The Cash Credit Facility is the most beneficial and largely used instrument of working capital. It can be utilized during a working capital crunch. The working capital loan process can be lengthy and confusing sometimes. But Terkar Capital will provide you with the finest options and arrange the appropriate solution.
So, right from documentation to disbursement of funds, we provide all the services conveniently. Once a client approaches us for funding, they become our regular customer. Thus, whenever it is Working Capital Financing, Terkar Capital is here at your service.
