Working Capital Loan

Types of Working Capital and Its Importance

Working capital is vital for the day-to-day operations of a business. It represents the liquidity available to meet short-term financial obligations. Understanding the different types of working capital is important, as businesses often require working capital finance to address any shortfalls.

Here are the types of working capital:

Permanent Working Capital:

Also known as fixed working capital, this type is required throughout the year to meet ongoing liabilities and maintain smooth operations.

Temporary Working Capital:

Businesses may need additional working capital temporarily, such as during peak seasons or for specific projects. They can opt for a working capital loan to boost temporary working capital and repay it once they generate returns.

Negative Working Capital:

Negative working capital occurs when current liabilities exceed current assets. A working capital loan can help bridge the cash flow gap and ensure uninterrupted operations.

Net and Gross Working Capital:

Gross working capital includes all current assets, while net working capital is calculated by deducting current liabilities from current assets. Both reflect a company’s ability to convert assets into cash within 12 months.

Regular Working Capital:

Regular working capital is needed for daily operations, covering expenses like salaries, raw material purchases, and overhead costs.

Reserve Working Capital:

This type involves maintaining a separate reserve of funds to address any mismanagement of permanent working capital.

Seasonal Working Capital:

Certain industries, such as manufacturing, experience peak demand during specific periods. Seasonal working capital ensures sufficient funds are available to scale production during those times.

Special Working Capital:

Special working capital is required for one-time events or circumstances that are outside the norm. Businesses may need funds for unexpected opportunities or to adapt to unique situations.

Importance of Working Capital Finance:

  • Working capital finance can be used to support various types of working capital needs, whether temporary or gross working capital.
  • It is quick and easy to obtain working capital finance, with online applications and fast disbursement.
  • Depending on your business plan and creditworthiness, you may qualify for working capital finance without collateral.
  • Working capital loans typically offer affordable interest rates and short loan tenures.

In conclusion, if your business is facing a shortage of working capital, consider availing of a working capital loan from Fullerton India. They offer competitive interest rates, relaxed eligibility criteria, and favorable terms and conditions. Don’t let a shortage of working capital hinder your business operations get in touch with Fullerton India to address your financial needs.

Note: The information provided is based on the content of the original blog post. Please refer to the specific lender’s terms and conditions for accurate and up-to-date information.

Also Read: Why is an MSME Loan the Perfect Finance Option for Small Business Owners?

What is a Working Capital Loan?

Running your own business can be a challenging task at times, but otherwise, it can be truly joyous. It is a special kind of happiness, seeing all your hard work paying off when your business achieves its goals. Imagine the success you have always dreamed of when you’re able to hold your manufactured product (or service) in your hand. 

However, numerous people face trouble when they launch their businesses. They may require a working capital loan to keep their business stay afloat. 

What is a working capital loan? 

Before launching your business, you may have already invested in some fixed assets like machines, equipment, factory, or other installations. However, there is also a need for some liquid money to manage the day-to-day requirements of your business. These costs may include paying your employees’ salary, rent, operational causes, or sustaining your business through a dry spell. 

Eligibility for a working capital loan

Here are some requirements for such a business loan – these are generally the requirements laid down but may vary across different lending institutions:

  • You must be over 25 years of age but under 65 years. 
  • The tax returns of your business should have already been filed for that time frame. 
  • The nature of your business should be something that needs constant cash flow to meet its working capital. 
  • The exact amount may vary from bank to NBFC (non-banking financial company) to NBFC, but you may not get a loan if your annual turnover was higher than a certain amount. 
  • Your business should have been up and running for a minimum of 2-3 years. 

While this is not a requirement, having a good CIBIL score goes a long way in securing a loan for your business. 

Must Read: How To Make Working Capital Work For Your Business?

How To Make Working Capital Work For Your Business?

If you own a business, you will know the innumerable day-to-day expenses. You have to pay the service personnel, hire new staff, and spend on research and development. Sometimes, a shortage of funds can make it difficult to meet these daily expenses.

However, there is no reason to worry. A working capital loan will have your back. You can approach a reliable lending institution for taking a loan. But, you have to manage your working capital well.

How To Manage Your Working Capital?

  1. Have A Regular Cash Flow

Well, you can take a working capital loan. But you have to ensure that revenues keep flowing in. Keep clients who do not delay payments. That will help you meet the basic expenses.

  1. Do Not Spend Your Working Capital On Expensive Assets

You might need new equipment for your business. However, do not use your working capital to purchase it. That will prevent you from meeting your regular expenses. 

  1. Improve Your Creditworthiness

Make sure you always clear your debts on time. Apart from that, try to maintain a stable income. It will improve your creditworthiness. You will face no problems while taking a loan.  However, do not forget to check the business loan requirements before applying.

Final Word

Fullerton India offers working capital loans for new businesses. You can get a loan of up to Rs 30 lakhs without collateral. Moreover, you will enjoy a flexible repayment tenure. So, why are you waiting? Go and check your eligibility now.

Must Read: A Complete Guide To Know About Working Capital Loans