All You Need to Know About Working Capital Loans
There are various points which have to be taken care of business. All you need is an idea, the dedication to take your idea into implementation. Starting a business is easy, but as the business grows, the needs increase and this is where you have to worry about getting the capital. This is where the Working Capital Loans come into the picture. Let us see what Working Capital Loans is and what you should know about them.
What is Working Capital Loan?
A loan is taken by entrepreneurs to finance their company’s everyday operations like payroll, rent, debt, and many more are known as working capital loans. This loan unlike the other business loan is not used for buying long-term assets but instead to cover up the short-term operational cost of the company.
Why opt for Working Capital Loans?
To get short-term funds for your emergencies, Working Capital Loan is important. The main reasons for taking working capital loans are:
1. To keep Cash Reserve: While running a business it is important to prepare yourself for the worst and this is done by keeping a cash reserve with you. This cash reserve will help the business in reviving during its down period while not impacting the employee’s salary as well. This COVID-19 was a classic situation in which companies with a cash reserve sailed through the pandemic, while many others did not see the light of the day.
2. Non-steady cash flow: If you are in a small business then t takes time for the invoices to be cleared, pay-out of the outstanding bill. This loan helps in boosting the cash flow and ensure that the business does not halt in any situation.
3. For Capitalising the Opportunity: Opportunity does not knock on your doors always, and when it does, it is important to stay prepared so you can cash the most out of it. Most of the time the shortage of funds causes the business owners to miss out on important opportunities. With the working capital loan, every opportunity can be grabbed and made the most of it and earn profits.
If you want to opt for the Working Loan Capital, it is important that you fulfill the business loan eligibility criteria of the lender from which you want to borrow. Different lenders may have different criteria’s but some common ones are as follows:
1. Most of the lenders offer collateral-free working capital loan up to Rs 50 Lakhs, thus the applicant must show a record of profits for the last two years.
2. The company must have an annual turnover of Rs 10 Lakhs.
3. The applicants eligible for the loan are proprietors, private limited companies, self-employed individuals, and partnerships firms working in services, manufacturing, or trading
4. The minimum annual income (ITR) of the enterprise must be 2 lakhs every year
5. With an experience of at least 2 years in the current business and 5 years altogether, the applicant can also apply for an unsecured small business loan.
6. For a loan amount of more than Rs 50 lakhs the applicant must have collateral to provide the lender with.
Feature of Working Capital Loan
If you opt for a Working capital Loan from Fullerton India you can enjoy some special features that it offers its customers. The features include:
1. Interest Rate Between 17 to 27%. The final rate will depend on factors like your income, collateral, location, and many more.
2. You can get a Collateral free Working capital loan up to Rs 30 Lakhs.
3. Flexible Repayment options between 12 and 36 months.
4. The processing fee of 6.5% of the loan amount.
For businesses, working capital loans and their types play an important role. Connecting the right company helps in getting the best interest rate and tenure that you can utilize correctly. With so many lenders, financing has become easy, so make sure you check the terms and conditions of each lender before you finalize one.