A working capital loan is a financial facility offered by banks and financial institutions to help businesses manage their day-to-day operational expenses. These expenses may include inventory procurement, payment of salaries, rent, utilities, vendor payments, and management of receivables and payables. Working capital loans ensure smooth business operations by maintaining adequate liquidity.
Unlike long-term loans used for expansion or asset creation, working capital loans are short-term or revolving facilities designed to bridge cash flow gaps arising from business cycles. They are essential for businesses experiencing seasonal demand, delayed receivables, or fluctuating operational costs.
As a consultancy firm, we assist businesses in understanding working capital loan options, eligibility requirements, documentation procedures, lender expectations, and regulatory considerations. We do not provide loans directly. All working capital facilities are sanctioned and disbursed solely by banks or financial institutions as per their internal credit policies and regulatory guidelines.
TYPES OF WORKING CAPITAL FACILITIES
- Overdraft (OD)
An overdraft facility allows a business or individual to withdraw funds beyond the available balance in their bank account up to a sanctioned limit. Interest is charged only on the amount utilized and for the duration of usage. Overdrafts offer flexibility and are commonly used for short-term cash shortages.
- Cash Credit (CC)
Cash credit is a revolving credit facility provided mainly to businesses against inventory and receivables. Borrowers can withdraw funds multiple times up to the sanctioned limit. Businesses are required to submit periodic stock and receivable statements to the lender. Interest is charged only on the utilized amount.
KEY FEATURES OF WORKING CAPITAL LOANS
- Short-term or revolving credit structure
- Loan limits based on turnover, operating cycle, and cash flow
- Interest charged only on the amount utilized
- Secured or unsecured options depending on facility type and borrower profile
- Periodic review and annual renewal of limits
- Flexible usage for operational expenses
ELIGIBILITY CRITERIA
- Business vintage and continuity of operations
- Annual turnover and profitability trends
- Cash flow stability and banking transactions
- Credit score and repayment history
- Compliance with statutory and regulatory requirements
- Availability of collateral, especially for cash credit facilities
Meeting eligibility criteria improves approval chances, though final approval is subject to lender evaluation.
HOW OUR CONSULTANCY HELPS
- Assist in assessing actual working capital requirements
- Explain differences between overdraft and cash credit facilities
- Guide on eligibility norms and documentation readiness
- Clarify lender assessment parameters and renewal processes
- Support businesses in preparing for limit enhancement or renewal
We act purely as an advisory partner. Loan sanction, limits, and terms are determined entirely by the lending institution.
IMPORTANT CONSIDERATIONS
- Accurate assessment of working capital needs to avoid over-borrowing
- Impact of interest cost on operating margins
- Compliance with reporting requirements such as stock statements
- Timely renewal to avoid disruption of facilities
- Alignment of working capital limits with business growth
Proper planning helps businesses use working capital facilities efficiently and sustainably.
CALL TO ACTION
Speak to Our Working Capital Consultant
DISCLAIMER
We act solely as a consultancy and advisory service provider. We do not sanction, approve, or disburse working capital loans. Final loan approval, limits, interest rates, tenure, and terms are determined exclusively by the respective bank or financial institution in accordance with applicable regulations and internal policies.