Working Capital Loan
A Working Capital Loan is a short-term financing option designed to help businesses meet their daily operational expenses, such as paying suppliers, managing payroll, or covering rent. It ensures smooth cash flow and stability during periods of fluctuating revenue.
Types of Working Capital Loan
Working capital loans can be categorized based on structure and purpose. The main types include
Short-Term Loan
Fixed loan amount to cover immediate operational costs.
Overdraft Facility
Borrow funds beyond the account balance, repay with flexibility.
Cash Credit
Continuous credit facility against current assets like inventory.
Invoice Financing
Loan against pending invoices to maintain liquidity.
Trade Credit
Credit extended by suppliers for purchase of goods/services.
Business Line of Credit
Flexible fund access with repayment only on utilized amount.
Why Working Capital Loan is Important?
Ensures Business Continuity
Maintains smooth operations during low cash flow.
Supports Growth & Expansion
Provides funds for scaling business activities.
Manages Seasonal Fluctuations
Helps businesses handle off-season financial crunches.
Quick & Flexible Access
Offers faster disbursal and multiple repayment options.
FAQs
Who can apply for a working capital loan?
SMEs, startups, retailers, wholesalers, manufacturers, and service providers with business stability.
What is the typical tenure of a working capital loan?
Usually ranges from 6 months to 36 months, depending on the lender.
Is collateral required for working capital loans?
Some are unsecured, while others may require collateral like inventory or receivables.
What is the maximum limit available?
Limits vary by lender, generally ranging from ₹50,000 to ₹5 Crores.