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WORKING CAPITAL LOAN
A Working capital loan refers to a loan which helps in financing daily operations of a company. This loan is useful when a company need funds for short-term operational requirements. When a firm doesn’t have adequate money with them to deal with their daily expenses, they generally reach out for the working capital loan. As explained above, the purpose for availing working capital loan is primarily for dealing with day-to-day expenses, however, there are some other causes for it as well:
In case of Changes in sales due to seasonal life of the business.
In case the companies do not have adequate cash reserves
In case of non-steady funds progress of the company. (In some systems it may take a longer time to transform inventory to cash, which leads to non-steady cash flows)
In case any possibility is there for the company you need to grab the opportunity to make the working capital loan work in case of shortage of funds.
Advantages of Working Capital loan
There is no limitation of spending for any given specific purpose. The lender requires to pay the money for the maintaining regular operations of the business.
There is no requirement for collateral security, you may become qualified for an unsecured working capital loan, Only in case, you have a great credit history.
It provides the speed and versatility of the process of sanction. The process for this type of loans takes very little time for its completion.
Eligibility for Working Capital loan
The Lender checks the worthiness of the customer for credit, for this, they check the authenticity and compensation ability of the customer by looking at the financial history and other records related to your business.
The following are some important things one should secure before applying:
It is mandatory to keep a favourable credit score (CIBIL score), which must be between 700-900 points.
Make sure that you meet the qualification criteria, the requirement for the loan and keep all the necessary documents set.
You should always maintain the database of the company’s financial situation and previous performance along with the statement of its cash flow.
The working capital loans can greatly help your company in making short-term credit to function efficiently. This type of business loan is the simplest way of preserving the credibility of the company.