Working Capital is an indicator of the financial condition of an organization or a company. Working capital indicates an organization's liquidity levels, operational efficiency, and short-term financial health. Often referred to as Net Working Capital (NWC), it is the difference between the current assets (like cash, accounts receivable, unpaid bills, inventories) and current liabilities (like accounts payable and debts) of a company. Company operations like inventory and debt management, revenue collection, and supplier payments give an idea of a company's working capital.
A Working Capital Loan is a loan to support the day-to-day operations, ranging from payment of employees’ wages to cover accounts payable. Business houses do not often have regular sales or revenue throughout the year, and thus the need for capital to keep the operations going may arise.
Banks and other Non-Banking Financial Institutions offer working capital loans to help offset your working expenses during such a low sales/revenue period. Companies having seasonal business cycles or cyclical sales or during periods of reduced business activity require such a loan is needed. These loans may be secured or unsecured, and you may or may not be required to pledge collateral to avail the loan, depending on the loan amount and the financial condition of your business.
A Working Capital Loan is a type of business loan used to meet your short-term liabilities or financial obligations. It is not meant to fund your business expansion or asset purchase plans. The loan could be utilized for:
A Working Capital Loan is applicable mainly for small and medium enterprises (SMEs) and usually comes with a loan tenure of 6-48 months. It is suitable for business houses that do not often have regular sales or revenue throughout the year. Thus, the need for capital to keep the operations going may arise. The working capital loan is an excellent choice for companies having cyclical sales or seasonal business cycles or even during periods of reduced business activity to sustain operations through the rest of the year.
You are eligible to apply for a Working Capital Loan if you are:
All banks/ lenders offer almost similar types of Working Capital Loans:
A thorough understanding of Working Capital and its features can help you apply for the Working Capital Loan to meet your day-to-day business needs. In short, working capital loans help businesses to manage sales fluctuations, maintain a cash reserve, help take bulk orders and equips to leverage trade opportunities.
Visit our website to opt for a Working Capital Loan with Piramal Finance.