If you are wondering what is working capital loan is, it is a credit facility offered by various banks and NBFCs to startups, self-employed professionals, business owners, MSMEs, and other businesses to manage their day-to-day business operations, thus enhancing business cash flow. These short-term business loans help businesses to meet their urgent cash requirements. You can conveniently repay them within 12 months. Working capital loans are offered as secured and unsecured loans, as well as in the form of an Overdraft facility, Letter of Credit, and Merchant Cash Advance.

• Maintains Cash Flow: Ensures your business has the liquidity to meet day-to-day operational expenses.
• Flexible Usage: Funds can be used for various purposes, including inventory purchase, payroll, and debt consolidation.
• Quick Disbursement: Many lenders offer fast processing, allowing businesses to access funds when needed urgently.
• No Collateral Required: Many working capital loans are unsecured, meaning no assets are required as collateral.

• Term Loan: A lump sum amount with a fixed repayment schedule over a set period.
• Overdraft Facility: Allows businesses to withdraw more money than they have in their account, up to a set limit.
• Invoice Financing: Borrowing against the amount due from customers’ invoices, providing immediate cash flow.
• Trade Credit: Short-term credit extended by suppliers to purchase goods and services.

• Interest Rate Range: Typically ranges from 10% to 18% per annum, depending on the lender and borrower’s creditworthiness.
• Factors Influencing Rates: Credit score, loan amount, repayment tenure, and lender policies affect the interest rate.
• Fixed vs Variable Rates: Some loans offer fixed rates, while others have variable rates that fluctuate with the market.

• Purpose: Term loans are for long-term investments like equipment or real estate, while working capital loans cover short-term operational needs.
• Repayment: Term loans have fixed repayments over years, whereas working capital loans often have shorter tenures and flexible repayment options.
• Collateral: Term loans may require collateral; many working capital loans do not.

• Business Vintage: Most lenders require a business to have been operational for at least 2-3 years.
• Annual Turnover: A minimum turnover requirement, often around ₹1 crore, depending on the lender.
• Credit Score: A good credit score (typically 700 or above) increases the chances of approval.
• Profitability: The business should be profitable with consistent cash flows.

• Application Process: Submit your loan application online or at the lender’s branch.
• Document Submission: Provide necessary documents such as financial statements, bank statements, and business plans.
• Approval and Disbursement: Once approved, the loan amount is disbursed to your business account within a few days.

• KYC Documents: Proof of identity, address, and business registration.
• Financial Statements: Audited financial statements, including profit & loss statements and balance sheets for the last 2-3 years.
• Bank Statements: Bank statements for the last 6-12 months.
• Tax Returns: Recent income tax returns filed by the business.

• SBI: Offers working capital loans with various options like Cash Credit and Overdraft facilities.
• HDFC Bank: Provides flexible working capital loans tailored to meet business needs.
• ICICI Bank: Offers both secured and unsecured working capital loans for SMEs.
• Axis Bank: Provides customized working capital finance solutions for small and large enterprises.
• Bank of Baroda: Offers a variety of working capital finance products to suit different business requirements.

• SBI: Offers working capital loans with various options like Cash Credit and Overdraft facilities.
• HDFC Bank: Provides flexible working capital loans tailored to meet business needs.
• ICICI Bank: Offers both secured and unsecured working capital loans for SMEs.
• Axis Bank: Provides customized working capital finance solutions for small and large enterprises.
• Bank of Baroda: Offers a variety of working capital finance products to suit different business requirements.

• Business Vintage: Your business should be operational for a minimum of 2-3 years.
• Financial Stability: Positive cash flow and profitability are critical for loan approval.
• Creditworthiness: A strong credit score is essential for securing favorable loan terms.
• Documents: Submission of KYC documents, financial statements, bank statements, and tax returns is typically required.

• Typical Rates: Interest rates generally range from 10% to 18% per annum, depending on the lender and borrower's profile.
• Factors: Credit score, loan tenure, business performance, and market conditions influence the interest rate.
• Fixed vs Variable: Some loans offer fixed interest rates, while others are variable, tied to the lender's base rate.

• Purpose: Designed to help small businesses cover short-term operational expenses such as payroll, inventory, and rent.
• Accessibility: Often available without collateral, making it easier for small businesses to secure funding.
• Flexible Repayment: Many lenders offer flexible repayment options suited to the cash flow cycles of small businesses.

• Short-Term Nature: Working capital loans are typically short-term, with repayment periods ranging from 6 months to 3 years.
• Purpose: They are intended to cover immediate financial needs and are not used for long-term investments.
• Renewable Facilities: Some working capital loans, like overdrafts, can be renewed annually based on the borrower’s requirements.