Who needs working capital loans?
This form of financing is a good source of capital for small and medium enterprises (SMEs) and is especially suitable for seasonal or cyclical businesses that don’t have sustained or stable sales all year round and need liquidity (cash in hand) to meet their everyday operating costs.
Seasonal businesses manufacture during the off-season to be able to sell aggressively during the peak season. As a result, they receive a chunk of payments only during the peak season, while through the rest of the year, they need funds to sustain operations you can use a working capital loan.
Working Capital Loan can be defined as a loan availed by the firms for covering their daily operational expenses. A working capital business loan can be used for the following purposes:
- Procure raw materials
- Purchase inventory
- Pay for overhead costs like electricity, rent, salaries and other utilities
- Finance blocked payments from debtors
- Pay suppliers in advance
- Maintain a healthy level of cash
These loans are the excellent way for the businesses to become more focused on their growth and generate capital. The working capital loans in India have become popular among the business owners for tackling with their financial needs. This loan is applicable for the small & medium enterprises. The majority of the working capital loans are unsecured, however the loans with high risks need some guarantee. The usual duration of a working capital in our country is from 6 to 12 months, whereas the interest rate ranges anywhere between 11% to 16% depending on the lender.
There can be several times when business can need small business working capital financing:
- Helps you manage sales fluctuations
- Acts as a cash cushion
- Prepares your business to take up a bulk order
- Stabilises and boosts cash flow
- Equips you to leverage business opportunities
- To help business’ growth, Bank offers easy Working Capital Loans up to Rs.30 lakh at an interest rate starting from 18% that can be conveniently repaid across a tenor of 12 to 60 months. It varies bank to bank.
Important facts you should know about the working capital loan
- The interest rate for a working capital loan generally ranges from 12% to 16% and may differ from one bank to another.
- The normal tenor of the working capital generally remains 12 months and comes with flexible collateral options.
- You should be between 25-55 years old.
- Your business should have a vintage of at least 3 years.
- Your business should have its Income Tax returns filed for at least the past 1 year.
- KYC documents for yourself and your promoters (if any).
- Certificate of business registration.
- Bank Current Account statement for the last 12 months.
- IT Returns for six months preceding the loan application date.
- Card settlement records for last three months.
Advantages of capital finance
Collateral-free Finance: You don’t have to pledge any business or personal asset as security while applying for a loan from Capital Float.
Short Tenured Loan: Our working capital finance is a short-term loan where you do not have to plan for years of monthly repayments. The amount can be paid back in 9-12 months.
Easy application: You can fill out our secure loan application form online within 10 minutes, from the comfort of your home or office.
Quick decision: Our data-driven competencies and team of highly skilled professionals assess your creditworthiness optimally, and the decision on your business loan without security is typically given on the same day
Speedy disbursal of funds: We assess your creditworthiness using conventional and unconventional data points that enables us to disburse collateral-free loans for business in just 3 days.
Flexible repayment: With EMIs customized based on the nature of your business, our quick small business loans for working capital make your budget management simple and hassle-free.inancial consultant financial consultant financial consultant