Want to keep the company’s everyday financial operations under control? Opt for a working capital loan now and get financial problems solved with ease. Being a business owner, it is extremely important for you to finance the day to day company’s operations to keep things smooth and under control. This is where the working capital loan comes handy. With the help of this, business owners can easily take this short-term loan, raise the capital, and repay the same once they get paid.
Let’s figure out the exact definition of working capital loans and get to know how these loans work and make business operations hassle-free.
What Is A Working Capital Loan?
A working capital loan can be simply defined as the loan taken by the business owners for covering their operational expenses daily. It is an ultimate way to finance the everyday operations of a business so that a firm can focus on growth rather than financial issues. The loan has now become popular in India as more and more business owners are applying for it to generate capital.
It helps businesses by offering them funding for their day to day or short-term operations. Such loan can be borrowed for various objectives such as:
- Paying suppliers in advance
- Procuring raw materials
- Maintaining a healthy level of cash
- Paying for overhead costs like rent, salaries, electricity, and other utilities
- Financial blocked payments from debtors
An unsecured business loan for your firm ranges between Rs 1 Lakh to Rs 5 Lakhs, and it can finance your business operations smoothly. However, it must be noted that these working capital loans are not used to purchase long-term assets or capital and are instead used to offer working capital that includes the company’s short-term needs. Hence, it is also known as a Short-Term Business Loan.
Also, this loan applies to small and medium-sized businesses for augmenting their daily business requirements. These working capital loans are unsecured. Therefore, you can get the same without taking any guarantee or mortgage, and it requires minimal documentation. Loan Lenders process your loan applications in one go and disburse the loan amount in just 3 days.
When Should Business Owners Consider Availing Working Capital Loans?
The primary objective of a working capital loan is to fund your daily business expenditures. Therefore, this type of loan is ideal for those firms who don’t have enough money in hand to deal with the needs of the operation of the company daily. You should consider for easy business loans if:
- Cash Cushion: The working capital loan is perfect for offering cash cushions for those companies who don’t have an adequate amount of cash reserves. These loans help them in offering additional capital for an emergency.
- For Capitalizing on an Opportunity: Nothing is more frustrating than losing a big opportunity due to insufficient funds, and here, working capital loans come into play. These loans help business owners in grabbing that golden chance that can turn the tables and make things favourable for their firm. So, if you have a seasonal business and face challenges in fetching good chances owing to inadequate budget, then head towards the working capital Loan in Delhi NCR and other cities, and take the whole picture of your business ahead in just one step. Get loans for multiple purposes under different terms namely capital loan, working capital loan, term loan, and machinery loan.
- Seasonal Sales Fluctuations: Small business often faces the problems in covering their daily expenditures when their sales get slow and here, working capital loans come to save them. If you also face seasonal sales fluctuation and fail to overcome financial issues, then opt for the working capital loans and get everything handy. The tenure that you can get is of 12 months, 18 months, and 24 months, and you are free to choose the option that suits your pocket.
What is the Eligibility Criterion for Working Capital Loan?
Before applying for working capital loans in India, it is essential to know about the eligibility terms and conditions which are given below.
Business owners who are looking for a working capital loan in India must have a business that has been in operation for 2 years. Also, the business should have at least 10 lakhs of annual turnover in the previous year. However, these requirements may vary from one lender to another.
Types of firms that are eligible for a working capital loan in India are:
- Private and Public Limited Companies
- Sole Proprietorship
To get a working capital loan, a business owner must own either house or business premises, and their previous year’s sale must be at least Rs 10 Lakhs. Also, their last year’s income tax return to be at least 1.5 Lakh.
How do Working Capital Loans work?
Working capital loans are ideal for those firms who face seasonal fluctuations the most or don’t have stable or predicted revenue throughout the year. Business owners with this type of seasonality often require working capital loans to pay salaries to the employees, raise the capital, and fund other operational expenses during the quiet period of the fourth quarter. Such loans are usually repaid by the time the business hits its busy season and no longer needs external financing.
To get a working capital loan, business owners must have to produce the following documents:
- PAN Card
- Business and house address proof
- Previous two years’ ITR
- Bank statement for nine months
Gone are the days when business owners feared losing golden opportunity just because of inadequate funds as now is the time when working capital loans are changing the future of small business. If you are facing any such difficulty in financing the daily operational needs of your business, then opt for a working capital loan online and deal with the problem of negative cash flow with ease.