How to Get Working Capital Loan in India?

Business | How to? 11 January 2022

Working capital is an important dimension of any business, whether it is a start-up or medium sized venture or an established organisation. It refers to the amount that any business entity has at its disposal at all points in time to cater to short term expenses and can be calculated as the difference between the current assets and liabilities that it has. For small and medium-sized companies, having continuous cash flow that can be used as working capital is a difficult proposition due to the less amount invested and uncertain profitability. This is where having business financing facilities can help tide over temporary financial issues without having to burn a hole in your pocket. Read on to know more about how you can get working capital loans or small business loans or sme loans, from PCHF to mitigate the burden of sudden business expenses.

How to Get Working Capital Loan in India?

Know the Different Types

The first thing to know before you take the decision of opting for capital loans is the various types of business financing options that are available at your disposal. They are:

  • Trade Credit- This type of financing takes place between two traders wherein one purchases goods but the payment is made later.
  • Bank Overdraft- In this type, financial institutions extend short term credit to the account, the moment the balance becomes zero and enable the account holder to withdraw money despite insufficient balance. The amount then is paid later.
  • Account Receivables- If you have amounts not paid by your customers in exchange of services or goods provided, the bills of the due amounts can be sold to financial institutions at discounted rates. The latter then provides immediate cash in lieu of the same which can be obtained from the debtor when the bill matures.
  • Short Term Loans- For meeting emergency situations, short term SME loans can be taken for a tenure of 1 year. These loans have a quick approval and disbursal process with minimum documentation work.

Types of Businesses Eligible for Working Capital loans

If your business entity is any of the following types, you can opt for a working capital finance without much hassle.

  • Sole Proprietorship
  • Limited Liability Partnerships
  • Private Limited Companies

Apart from these certain criteria like a decent annual turnover and number of years that your company has been running the business are also considered by financial institutions. The type of trade you are running also determines your requirements and the ease with which you will get the loans.

Documents Required for Small Business Loan

The documents required for applying for small business loans are:

  • Standard KYC documents that include name, address, identity, age proofs
  • Certificates of business incorporation, including registration documents, goods and services tax
  • Last six months bank statement of the Business Current account
  • Current year’s IT returns
  • Outstanding debts and its details, if any
  • Purchase orders indicating the type of goods ordered and the total capital required for the same

Where to Apply for Working Capital Loan

There is no dearth of sources from where working capital can be obtained.

Bank Aggregators- If you do not have time to spare to look for your business loan sourcing, you can try out the Online Bank aggregators or financial institutions who offer loans for working capital at affordable rates of interest. The application process is also quite easy and approval comes fast if you have all the documents in place.

Banking Institutions:- Many banks such as Punjab National Bank, State Bank of India, Indusind Bank offer small business loans at competitive rates. It becomes more advantageous if you have an account with any of the banks offering such loans.

Online Lenders- If you are looking for quick cash, these online lending platforms can be just the right ones for you. You can download their apps on your phones and look out for offers on interest rates that come from time to time.

Conclusion

Negative working capital is the watchword for dwindling business. To avoid such situations from cropping up, it is best to go for business loans from such reputable financial institutions as PCHF and let your business reach its zenith of success.

Working capital loans are extremely popular in India, especially among small and medium sized business companies. Obtaining a capital loan is also not a tedious process if you have all the required documents handy. Banking institutions and financial institutions provide such loans with easy approval processes, both with short-term as well as long-term tenures

[Also Read: Working Capital Management in a Post-Covid World ]

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