What Is A Working Capital Loan?

Working capital refers to the funds utilised by a business to sustain its normal and short-term operations. To secure these funds, companies frequently resort to obtaining a working capital loan. This loan is utilised to cover various daily business expenses, including salaries, bills, raw material purchases, marketing and advertising costs, selling expenses, and numerous other business operations.

A working capital loan has the potential to offer essential assistance in launching business operations. It is not uncommon for new ventures to face difficulty in acquiring adequate funding during the early stages. However, with the provision of a working capital loan, new businesses can overcome this challenge and begin generating revenue. As the enterprise expands and attains profitability, the loan can be promptly repaid, facilitating the continued growth and success of the start-up.

However, the borrower should note that the working capital loans are lump sum loans. It means the borrower can get the money all at once. But it is also classified as a demand loan which means the lender is permitted to demand the sum back at any time.

Working capital loans are almost always secured loans which mean if the borrower is unable to repay the loan, the lender can acquire the assets of the business and sell them to get the money back. The repayment structure i.e. interest on working capital loan, terms and conditions and the amortisation period of a working capital loan for new business in India depend on two factors such as the borrower’s capacity to cover its debt payments and the assets that are secured against the loan. Generally working capital loan interest rates are far lower if land or real estate is kept as collateral.

However, if you are looking for an unsecured business loan in Mumbai www.fundfastfintech.com, we would be happy to assist you.

Eligibility Criteria For A Working Capital Loan For Businesses In India

The eligibility criteria for a working capital loan may differ from lender to lender. However, there are a few basic requirements listed below that the borrower has to fulfil to be eligible for the working capital loans for startups, new businesses, and small businesses.

The loan applicant should be a minimum of 21 years of age
The age limit of the applicant should not exceed over 64 years of age
The applicant should be an Indian citizen
The business vintage should be a minimum of 2 years
The business must also have a positive financial history, meaning it should have had no major losses in the past
Some form of collateral, generally assets from the business are required as security

Documents Required For Working Capital Loan Application

Application form; filled and signed by all the borrowers
Passport-sized photo of all borrowers
Valid ID proof such as a Pan card, Aadhar card, Passport, Voter’s ID card, & Driving licence etc.
Identity proof and valid documentation of the business
Bank statements

What Are The Financial Benefits Of Securing A Working Capital Loan?

Let us now examine the four key advantages that working capital loans offer to small businesses globally.

Fulfils Short-Term Capital Deficiency :

At times, businesses may experience slow periods. During such circumstances, working capital loans can serve as a valuable resource in addressing capital shortfalls and bridging the gap.

Quick, Easy To Apply, And Secure :

Working capital loans are structured in a manner that enables the applicant to secure the loan on time, without consuming a significant amount of time, thereby allowing the applicant to focus on their business operations.

Maintains Cash Flow :

A business has a multitude of requirements, and to fulfil those needs, a stable cash flow is imperative. Working capital offers this cash flow in times of necessity and can be repaid when the business experiences a period of heightened activity.

The Amount Is Received In Lump Sum :

The requested loan amount is disbursed in a lump sum, which has a more significant impact on the business compared to receiving partial disbursements.

If you are interested in procuring working capital loans for small business, startups, new businesses, or expanding existing businesses, do not hesitate to contact us! www.fundfastfintech.com takes great pleasure in helping entrepreneurs succeed.

Working Capital