Regardless of its structure and size, every business requires working capital to manage day-to-day operations. A shortage of substantial working capital can significantly disrupt supply chain management and obstruct daily business activities.
Therefore, it is essential for business owners to learn about working capital management to ensure steady cash flow in their organisations. However, entrepreneurs can finance their operations through working capital loans when facing a shortage of funds.
5 simplest ways to get a working capital loan
Such credit options fall under the segment of short-term loans that are usually acquired to cover the expenses of daily business operations. Such operational needs include purchasing equipment, paying off creditors, upgrading machinery, etc. Therefore, it is essential to know the significance of working capital management to avoid the deterioration of cash reserves in the business.
Here are some of the ways elucidated below which will allow borrowers to avail of working capital loans with ease:
1. Choose your preferred type of working capital loan
Although the financing market in India offers various types of working capital loans, individuals can select any from the following:
- Short-term loan
Such advances allow business owners to manage the daily operations of their organisation. For example, an organisation can purchase raw materials, upgrade inventory and human resources, and fulfil the same; you can obtain a short-term working capital loan.
- Long-term loan
Established businesses can acquire long-term working capital loans to maintain adequate cash reserves in the future and working capital finance expansion or growth plans. These credit options come with an extended repayment option which allows businesses to adjust their borrowings with long-term plans.
- Unsecured loan
An unsecured working capital loan does not demand any collateral to pledge for raising funds. Therefore, resultantly acquiring such advances is convenient and prompt. Such credit options also come in the form of business loans extended by leading financial institutions like Bajaj Finserv. In this type of credit option, borrowers are not required to pledge any asset to avail of funds.
Nonetheless, borrowers must know how to calculate working capital requirements for their business and apply accordingly to bridge the liquidity gap and avoid further damage to the enterprise’s operations.
2. Check eligibility parameters
Such credit options are extended to partnership firms, public and private limited companies, self-proprietorship etc. Furthermore, the qualifying parameters of working capital loans differ across lending institutions. Here are some of the basic requirements to avail of this type of credit facility:
- Applicant’s age should be within 24-70 years
- Must be an Indian resident
- CIBIL score must be 685 or higher
- Must have a business vintage of at least 3 years
3. Submit necessary documents
Individuals must produce necessary documents to ensure an uninterrupted loan application procedure, apart from meeting eligibility parameters. Here are some of the basic documents that need to be submitted by the applicants:
- KYC documents
- Business ownership proof
- Other financial documents
4. Consider essential factors
Apart from knowing working capital management, borrowers need to take into account some essential factors, including:
- Interest rate
The interest rates of such loans vary across lending institutions. Usually, long-term credit comes with comparatively affordable interest rates. In this regard, availing of business loans will be more beneficial for borrowers as these come with competitive interest rates and repayment tenor of up to 7 years.
Moreover, with the Flexi loan facility, borrowers can manage fluctuating working capital requirements without additional charges. Borrowers can meet short-term financial requirements and improve business cash flow by knowing how to make the most out of a Flexi business loan.
- Processing fee
Availing such advances from reputed lenders will allow borrowers to pay nominal processing fees and other charges. However, it is wise to learn about these charges beforehand to avoid repayment burden in the long run.
5. Application process
Borrowers can apply for the working capital loan by visiting their preferred lender’s website along with documents. Here is the step-wise process of applying for such a credit option:
Step 1: Click on ‘apply online’ to open the application form
Step 2: Input your contact number and name to receive the OTP
Step 3: Submit your personal and business details
Step 4: Upload bank documents of the last 6 months
After submitting the application form, one of the representatives will connect you for further proceedings.
However, a working capital loan comes with a longer processing time. In that case, borrowers can go for other financing options such as business loans to meet necessary working capital needs. Besides, they can also avail of exclusive pre-approved offers against this credit instrument to bypass the hassle of extensive documentation and save time. Therefore, check your pre-approved offers by mentioning your essential credentials.
To sum it up, every enterprise requires adequate working capital to perform daily operations. Thus, working capital indicates a company’s financial standing and inefficient working capital management can significantly affect business revenue and lead to severe circumstances.