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Working Capital

To manage the short-term needs of a business and fulfill everyday operational expenses, owners resort to a loan, known as the working capital loan. These loans are offered by a bank or a lender to help owners keep their businesses running smoothly without facing shortages in cash flows. 
However, it is important to remember that working capital loans should be used wisely and only for their intended purpose. When used correctly, a working capital loan can be a great tool to help a business owner keep their business afloat.
The need for a working capital loan for new business can arise when a company is faced with decisions such as clearing debts, hiring employees, covering wages, or even closing rent. In such cases, these loans can provide the necessary funding to help a company meet its obligations and continue its daily operations. Moreover, you can ‘buy time’ with these loans, however, to be eventually repaid in set intervals at comfortable EMIs.
 

Unique Points & Features

No end-use restrictions

The loan obtained on working capital has freedom of expenditure. This means that the borrower can use the money to invest in the growth of the business without having to worry about disclosing or explaining the lenders on his end-use.

Zero collateral loans

Working capital loans are mostly unsecured or collateral-free loans. With short-term capital, the borrower will not be requested to submit collateral on the loan obtained, thus securing his assets.

Flexible withdrawal facility

The Flexi facility unlike term loans allows its customers to borrow loans on a cash limit that they can withdraw at their discretion and pay interest only for the amount used and not worry about the prepayment charges.

Pre-approval on loans

Working capital loans offer a pre approval facility on the loan. This means that the borrower can get a loan pre-approved and then decide where or how to use the loan.

Zero equity loan

The bank or the lender will not ask the applicant for any liability or hold on to their equity shares. Thus the business owner may possess full control over his business with no impact on his ownership or equity of the company.

Types

Type By EMI

Term Loan:

A term loan is the entirety of the loan to be paid over the set intervals for the amount borrowed with interest in full.

Flexi Loan:

Flexi loan unlike term loan has a cash limit. The borrower can withdraw any amount from the cash limit and may pay only for the amount used rather than the entirety of the available funds.

Balloon Payment:

The borrower can repay relatively smaller during the course of the loan term and by a large at the end of the term, i.e maturity of the balloon loan. 

Type By Loan

Packing Credit:

Packing credit or pre-shipment finance is a type of loan given by lenders to sellers to finance their exporting demands against procuring the raw material to arrange the goods.

Cash Credit:

Cash credit or bank overdraft is an extended credit facility used to fund instant cash requirements of a business up to a certain limit when the bank account is zeroed on pre-existing funds.

Letter Of Credit:

LC or Letter of credit or bank guarantee is a formal document provided by a bank to the buyer of the goods and services that they may pay on their behalf to the seller if he fails to make the payments on time or defaults on the payments. 

Line Of Credit:

A line of credit provides a cash limit to the borrower against an unsecured policy that he may borrow, repay, and borrow again until he wishes to draw a line over the limit.

Bill Discounting:

Bill discounting or invoice discounting are funds obtained against unpaid invoices. Discounting bills is a great way for traders to get short-term financing. The applicants may sell their unpaid invoices to the bank or a lender and get the money they need by paying only a small commission fee to avail of the service. 

Post Shipment Finance:

For sellers managing overseas buyers, the loan is granted when there is a gap between the date of shipment and the payment on the goods or services. To cover the costs incurred the loan is provided against the shipments already made.

Accounts Receivable:

If you have a strong and reliable customer base, then you can take out this type of loan. Most lenders are hesitant to offer this type of loan because there is always a risk of default when it comes to invoicing payments.

Bridging Loan:

It is a loan used to bridge gaps between financial obligations. This is a short-term emergency loan used to obtain immediate cash flow.

Invoice Factoring:

With invoice factoring, businesses can sell their outstanding invoices or accounts receivable to a factoring company. This can help offset the impact of having unpaid receivables and help improve your business’s cash flow

Eligibility Criteria

Age:

21 – 65 years (Conditions Apply)

Type of Employment:

Self-Employed/Business Owner(Govt, Partnership Firm, Large Enterprises, MSME, etc.)

Nationality:

Resident of India

Income:

Minimum ~ Rs. 2,00,000/- p.a onwards

Credit/CIBIL Score:

Any profile(Credit score ~ 700 or above has a higher chance of getting a quick and instant loan with high funding at lower interest rates)

Employment Stability:

1 – 3 years and above (Business should not be blacklisted)
Note:
The eligibility criteria mentioned above are generic and may vary from lender to lender. Please reach out to us at Loanz360 for a personalized eligibility chart.

Documentation

Note:
Documents requested may vary from lender to lender, contact Loanz360 for any inquiry.

Proof of Identity and Address

– Voter’s ID/Passport/PAN Card or Form 60/Driving License/Aadhaar Card 

Income Proof Documents

– Latest bank statements of the past 1 year/Copy of Income Tax Returns (ITR)/C.A certified Balance Sheet/Profit and Loss Statements/Ownership Proof/Business Registration Certificate/Partnership Deed(If applicable)/CMA – Credit monitoring arrangement (If required)

Additional Requirements:

Duly filled application form/passport-sized photos

Charges & Interest Rate

CURRENT WORKING CAPITAL LOAN INTEREST RATES START @ 7.85% P.A ONWARDS.

Compare interest rates and check more deals offered on working capital loans by our financial partners at Loanz360 in 2022.

Bank Name

HDFC

IDBI Bank

Indian Overseas Bank

ICICI

IDFC Bank

Canara Bank

Fullerton India

IIFL Finance

Axis Bank

Bajaj Finserv

Tata Capital

Hero Fincorp

Kotak Mahindra

RBL Bank

Shriram City

Aditya Birla

Yes Bank

Interest Rate (P.A)

10.00% onwards

7.85%

11.49%

10.99%

11.69%

9.20%

17.00%

11.75%

14.25%

17.00%

19.00%

26.00%

16.00%

17.50%

15.00%

18.00%

13.00%

Note:
Our financial partners are not limited to the above-mentioned banks. Contact Loanz360 to discuss options. The interest rates may vary subject to conditions.

FAQ

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