Working Capital Loan
A working capital loan, as the name suggests, is taken out by companies to finance their everyday operations. Working capital loans are used for short-term expenses, to cover accounts payable, wages, and other day-to-day expenses. These loans are not used to buy long-term assets or investments.
These loans are an excellent way for businesses to focus on their growth and generate more revenue. Over the years, working capital loans have become popular in India amongst business owners as it helps them overcome short-term financial hurdles.
When should you consider availing a working capital loan?
The main purpose of this type of loan is to fund the short-term cash needs of a business. When a business is cash-strapped, unable to deal with their daily expenses, it is advisable to apply for a working capital loan. Many businesses in India work on a cyclical sales model, and they don't have a stable revenue throughout the year. In such cases, a working capital loan comes in handy, to cover the salaries of employees and other working costs of the business during the off season. The loan is repaid as soon as sales pick up and financing is no longer required.
Advantages of Working Capital Loan
There are several advantages to taking a working capital loan.
Following is an overview:
• It allows you the freedom to operate your business without having to worry about day-to-day costs
• These loans are sanctioned based on the existing orders or outstanding invoices Hence, you can't borrow more than you can afford to pay back, eliminating the worries generally associated with a small business loan
• This kind of loan also doesn't require you to pledge any collateral, provided you have a good credit history
• These loans are flexible, with varying repayment terms and attractive interest rates as applicable to your unique credit profile
• Working capital loan has little to zero restrictions. However, the loan amount should be used exclusively for business purposes
Working Capital Loan – How to apply
If you are looking for a Working Capital Loan and are unsure about how to apply, then CreditMantri can guide you. You can typically apply for a business loan which can be utilized as working capital for your business.
You can check your eligibility and apply for a business loan by signing up with CreditMantri. It is quick, simple and above all, free.
CreditMantri matches your credit and demographic profile to the lender's lending criteria and presents you a shortlist of only those lenders willing to lend to you based on your unique credit profile. In effect, we pre-screen your application to make sure you are likely to qualify as per the lender's credit criteria. Hence, the chances of your business loan application getting approved are higher.
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