What Is Working Capital Finance: A Guide To Small Business Funding

In order to do great business, it is important to ensure that a lack of funds isn’t hampering your growth. One way to guarantee steady revenue every month is through working capital finance. Working capital finance help small business entrepreneurs like you fund operations and manage cash flow effectively. Just like your body can’t function without the rhythmic pumping of your heart, your business can’t survive without adequate working capital finance.

What Is Working Capital Finance?
Simply put, it is the money you need to run your business operations on a daily basis without a single glitch. Working capital loans are provided by lenders to meet your everyday needs. They are also known as small-term loans as you use them for short durations. Consider the following example to understand how working capital financing actually works.

Mr. Atharv Mathur from Ajmer runs a medium-sized business that manufactures fast-moving consumer goods. Last October, he received a large order and was also asked to execute the initial packaging. This was an opportunity he didn’t want to let go of, as it would increase his business revenue manifold. However, he required funds to ensure that this project went smoothly, so he immediately applied for a working capital loan. Not only was he able to deliver the project on time, he also paid almost half of his loan amount shortly afterwards from the profits thus generated.

Benefits Of Working Capital Loans:

  • Unsecured Loans: Small business loans or working capital loans are unsecured. This means that you don’t have to pledge any collateral as security while applying for them. This feature of working capital loans is very useful as you don’t have to risk any of your assets and valuables in case of failure of repayment.
  • Line of Credit: This is feature is beneficial in many ways. Line of credit is a credit line given to you for a set tenor. It helps you lower your EMIs as you have to pay only interest on a monthly basis and not the principal. The principal amount is payable at the end of your tenor. Moreover, you can withdraw as much as you need and interest will be calculated on this amount, not the entire sum.
  • Easy Documentation: Working capital loans have an easier and simpler documentation process. The only documents that you require are basic ones such as KYC documents and certificate of practice.
  • Flexibility: Working capital loans have flexible repayment terms with attractive interest rates.

How Can You Qualify For Working Capital Loans?

  • Understand Your Requirements: You must know why you need the loan. Do you research and identify a working capital loan that suits your needs best, and also check whether the lender is offering terms that are favourable for your business.
  • Your Experience Counts: Even though working capital loans are available for you, lenders want to be assured of the fact that your business is a solid proposition. Hence, your firm must be a minimum of three years old and you must have a business vintage that vouches for the same.
  • Your Credit Score Is Your Saviour: Having an excellent credit score is half the battle won. But, if your credit score is low, remedy it by paying unpaid bills, clearing debts and putting off expenditures on credit. Also, don’t open any new bank accounts as this contributes to a poor credit score.

Now that you know how working capital financing can your business the support that it needs, take a moment to explore Bajaj Finserv’s Working Capital Loans. They offer exciting benefits with attractive rates of interest.


Post Author: sam bawa

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