Are you planning to apply for a Working Capital Loan to meet your short-term financial requirements? This article takes you through what is a Working Capital Loan and benefits of Working Capital Loans.
Working Capital Loan – The Meaning
A Working Capital Loan offers businesses mainly under Micro Small and Medium Enterprises- MSME to meet the daily financial and operational expenses. It is a financial credit to businesses ranging from startups, individual entrepreneurs, small companies, self-employed professionals and nonprofessionals to fulfil the immediate business necessities to run the business. It is relevant for businesses under the manufacturing, services, retailing and trading sectors. There are multiple advantages of Working Capital Loan that offer the business to maintain the accounts payables, payment of overheads, purchase of short term inventory and raw materials, wages and other short terms financial requirements to run the business efficiently. The Working Capital Loan amount can't be utilised to purchase long term assets or for investment purposes. The Working Capital Loan offers the borrower ranging short term tenures for repayment for immediate liquidity of funds. At attractive interest rates and straight forward eligibility criteria, the Working Capital Loan is a seamless and effortless means of the financial requirement for your business's continuous operational process.
Benefits of Working Capital Loans
Short Term Loan: The Working Capital Low repayment tenure is as short as 6 months up to 24 months offering the borrower a relatively shorter duration of the loan. The loan tenure varies from Bank to Bank and could be curated to suit the business requirement. As the tenure is short, the borrower does not have to arrange for long-term EMIs when availing the loan. This advantage of Working Capital Loan offers relatively new businesses the finances for a short term tenure.
Manage Financial Complications: Your business may own a lot of fixed assets and may be flourishing; your business may have a few financial glitches for the daily operations. In such a situation, to aid your financial obstacles, a Working Capital Loan is your best bet. Even under the best of circumstances, your business may operate in, a drop in the working capital may lead to financial pressure on the company, added borrowing, later payments to creditors. All of these aspects pile up to result in a lower credit rating for the company. This leads to higher interest rates and low credibility in the market for the business. To handle these complications and have a flawless credit record, a Working Capital Loan offers the financial capability to maintain your daily operational needs.
Collateral: One of the essential benefits of Working Capital Loans is the collateral requirement. Depending on the bank you are applying from, the loan can be secured or an unsecured one. For instance, HDFC Bank offers a Working Capital Loan with flexible collateral options for the borrower to choose from, ranging from securities, property, business or investments. However, other banks could also offer an unsecured Working Capital Loan if you have a good credit history and repayment track record. The bank will carry out its due diligence, and post verification will classify you under the specific category. However, under an unsecured loan, the bank may fix the tenure and interest rate for repayment.
Aids in Lean Periods: If your business has a seasonal turnover and rakes in profit only during a particular season. You may face challenges to carry out your business efficiently. This could result in a slump in your annual revenues. To balance out your operational expenses, a Working Capital Loan is an adequate fit. This loan will aid you to overcome the financial revenue fluctuations during the year. This is an imperative advantage of the Working Capital Loan
Repayment: The Working Capital Loan offers curated repayment schedules to match your business cashflows and profits. Banks provide the flexibility and design the repayment plan with tenures and interest rates, keeping in mind the borrower's financial capability.
With many benefits Working Capital Loans, it's a sure shot financial option to keep your business operating seamlessly. Apply for a Working Capital Loan with HDFC Bank today.
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*Terms and conditions apply. Business Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.