Working Capital Loans And What You Should Know About Them
Are your current liabilities exceeding your current assets? If so, be warned! Your working capital is not being well-managed. Working capital can simply be defined as current assets minus all the current liabilities. This amount is the cash that is needed for the daily operations. This is the sum used to cover all of the company’s short term expenses like inventory costs, operating expenses and even short-term debts.
Working Capital Loans: Features And Advantages
A working capital Financing can be very beneficial to your small business, helping pay for daily operating costs.
Here are some of its features and advantages:
Speedy Application Process:
If you are eligible for a working capital loan, you can receive the loan amount almost instantly and do not have to go through a long application and waiting procedure. An efficient lender can give you flexible working capital loan terms with approval in 24 hours and money in your account in another 24 hours. This is to provide help to firms with seasonal fluctuations and to improve their cash flow.
Absence of Collateral:
Collateral can be defined as any asset that the borrower has to offer as a security for the loan. It is better for your business to apply for an unsecured working capital loan that doesn’t need any collateral; however, as a result, you may need to pay slightly higher interest rates.
No restrictions over your chosen loan amount:
When you take a working capital loan, you are free to spend the amount at your own discretion without any kind of interference from the lender. All that the lenders are concerned about is that you use the loan to tackle your business’ working capital needs, as this loan is customized for that. For other purposes, there are always business loans and machinery loans as well as personal loans.
Affordable Interest Rates:
Working capital loans rates aren’t phenomenally expensive or difficult to pay. On an average the interest rates for working capital loans start from 16% with flexible repayment durations. This makes it easy to pay the EMIs over time and thus makes borrowing them affordable for businesses.
Since working capital is a relatively short term need for businesses, the tenor for these loans is short and starts from 12 months going up to 96 months. For businesses, a shorter tenor can mean that repayment would be much easier and the loan could get cleared faster than long-term loans.
Requires Basic Eligibility Documents:
As is applicable to all other loans, even working capital loans have some eligibility criteria. This requires you to submit various documents pertaining to your business to the lender during application. The list of documents requires varies from lender to lender, but the basic paperwork consists of financial statements, bank account statements, business proof, photographs of the business owner and other IDs.
Offers a Convenient Line of Credit Facility:
One of the most helpful features of a working capital loan is the line of credit, which gives you the flexibility to borrow up to a certain amount for a chosen tenor. As a business owner you can choose to withdraw any amount up to the limit and pay interest only on what you use. Your monthly EMIs also consist of only interest dues, which decreases the pressure on you. You are free to repay the amount or a portion of the amount you use, and re-avail it if you need it. This gives you flexibility, especially when it comes to your working capital needs.
You can gain immensely from all these benefits and conveniently finance your working capital needs with the easy and flexible Working Capital Finance from Bajaj Finserv. Along with quick disbursement of the loan amount you can also gain from the line of credit and instant online access to your loan account.