Working Capital Finance

working-capital-loan

 

Running a company comes with a lot of complications. This is more of a problem for small and medium scale enterprises when it comes to funding. A working capital loan is something that helps the business in exactly this situation. Simply put, a working capital loan is financing obtained to fund the day to day operations of a company. Note that it is not for long term assets or investments, but for short term purposes such as paying wages, utility bills, etc.

Importance of Working Capital

Sometimes, companies do not have a stable sale or do not have liquid assets to cover their day to day expenses. In such cases, the need of working capital financing is high. This can happen when a company has seasonal or cyclical sales. That is, a large and significant part of their sales take place during a certain cycle or term. As a result, these companies may not have the means to pay the wages, bills, pay suppliers in advance, etc. The working capital loan allows such companies to be able to run their business smoothly by providing them with loans to cover these expenses. Having a loan to support the company’s running in such times is extremely crucial as this can cause their production or functioning to stop which can lead to huge loss and even closure.

Types of Working Capital Loan

There are types of working capital loans as follows – 

  • Cash credit

In this type, the borrower gets sanctioned a loan amount which they must not exceed. However, within this amount, they can use the amount they require, and the interest will be charged only the funds used and not on the entire sanctioned amount. 

  • Overdraft (OD)

This facility allows the borrower to withdraw funds that are more than the available balance in their accounts by keeping financial instruments or property as assets.

  • Bill discounting

In this type, the borrower approaches a bank or financial institution with the bills that are generated during their business. The bill acts as a document used to obtain the payment from the debtor. The bank applies a discount on the bill amount according to the interest rates and gives the remaining amount to the seller.

Features of Working Capital

Working capital for small business and medium scaled enterprises are the most necessary as they often lack liquid assets and stable sales. Here are some of the features and benefits of working capital finance – 

  • The working capital loans can be obtained for flexible amounts be it just a few tens of thousands or even crores. This depends on the lending financial institution. 
  • Since the purpose of these loans is immediate, they are processed significantly fast within a few days. 
  • No matter how big the financing is, the business owner will have complete control over the company.
  • As the requirement is for a short term, the working capital loan is granted for short loan periods ranging from a few months to a few years.   
  • You can obtain unsecured working capital loans where there is no collateral required. However, this will depend on your credit score and other factors. 
  • The loans can be obtained with varying interest rates and repayment cycles. 
working-capital-loan-at-terkar-capital

Eligibility criteria to apply Working capital Loan

In order to be able to apply for working capital loan, there are a few eligibility criteria you may need to meet. There may be additional criteria depending on the bank or financial institution lending the loan. Do check this before applying. 

  • The business must meet the minimum operation period required by the institution. 
  • Your business will need to meet the minimum turnover amount required by the bank or institution.
  • The business must not be categorized under blacklisted/excluded list of the SBA finance.
  • You may have to meet the physical location requirements of the institution.
  • Your company must not be an NGO, trust, or a charitable organization.

Rate of Interest

The rate of interest you can receive will depend on a number of factors. This will depend on your company’s turnover, credit scores, and other aspects. The bank or financial institution will consider these into account while quoting you the possible interest rates.

Document required for working capital financing

Although the exact documents will vary upon the working capital loan requirements of the lending institution, the following are the general documents you will need in most cases –

  • KYC documents - PAN card, Adhar card, etc of the business owner.
  • PAN Card of the company.
  • Company bank statements for the past 12 months.
  • Proof of business registration.
  • Proof of company turnover.
  • Documents detailing any existing loans.
  • Partnership deed, if any.
  • Property documents.

When should apply for working capital finance?

If you own a business that has a seasonal or cyclical sales, the best time to apply for working capital loan scheme would be during your off-season as your business would not be generating revenue during this and will need the finances to cover your expenses. Thanks to the fast processing of these loans, you will be able to obtain the funds in a short time. 

Why Choose Terkar Capital?

If you’re looking for an effortless and fast working capital loan process, Terkar Capital is the best place for you. As one of the top working capital loan facilitators in Pune, 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 ROI’s 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

For inquiries kindly fill the form and our representative will soon get  back to you. 

  8308629820 / 8262831330
  yes@terkarcapital.com