WHAT IS WORKING LOAN CAPITAL
Working Capital Loan can be defined as a loan availed by the firms for converting their daily operational expenses.These loans are the excellent way for the business to become more focused on their growth and generate capital.These terms are not used for buying long -term assets and generally used for covering wages, account payable nad other several operations.
This loan is applicable for the small & medium enterprises for augmenting their workig capital needs and meeting the daily operational expenditure.The majority of the working capital loans is unsecured, however the loans with high risks need some gurantee.The usual duration of working capital in our country is from 6 to 12 months, whereas the intrest rate ranges anywhere between 11% to 16 % depending on the lender.
When You Should Consider Availing A Working Capital Loan:
The main purpose of this loan is to finance the short term operational needs of a company .When a firm doesn't have enough money on the hand for dealing their daily expenses,they generally go for the working capital loans.In simple words,these loans are the coorporate debt borrowings that are used by a firm for tacking with their daily expenses.
As mentioned above,the working capital loans are made for using a specific purpose .i.e dealing with daily business operations,however there can be some different reasons for borrowing money from a lender.
Have a look at the top reasons for taking a working capital loan.
Seasonal sales fluctuations
Non - Steady cash flow
4. For capitallising on an oppurtunity
Advantages of Working Capital Loan:
The working capital loans are based on the existing orders or outstanding invoices. As a result of this you can't borrow more then the amount you know you will not be able to pay back quickly,that elimainatee the worries associated with a small business loan.
Well one should always avoid taking loans as long as possible but this type of loanhas its own advantages:
- No need for any collateral
- Speed and Flexibility
- Spending money at your discretion
Types of Working Loan:
How to get working capital loans,you should take a look at its types and choose the one that suits your needs.
- Trade Creditor
- Bank overdraft Facility
- Account Recievable Loan
- Factoring or advances
- Short - term loan
- Equity funding from investors or personal resources