Working Capital Loan

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

Fact about 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.

Documents required

  • 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.

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