Running a business comes with daily challenges. Changing market condition, policy changes, economy rise, and fall can make the business a slippery road. The most common challenge every small business owner face is the liquidity crunch. Unplanned finances and unavoidable expenses can create an urgent need for capital. You must be cautious if you are running a business without a financial plan and contingency funds in an account.
For those who have already faced the liquidity issues knows the importance of Working Capital Loans. Your short-term financial woes can be easily handled if you have availed the working capital loan. In addition to that, it also helps in creating a healthy and time-driven credit cycle with the associated vendors.
With the development of economy and ease of doing business, many factors which were hurdles before, have been relaxed, and loan processing and approvals have been made easier for the common public.
What is Working Capital Loan?
Business drives on daily transactions and cash operations, which is required for settling payments and dues. As the credit cycle in most of the industries ranging from 30-180 days, business owners must maintain expenses and payments with the associated vendors and suppliers. Such financial woes can be aided by working capital loans which provide overdraft facilities in the account and relaxes the crunch in the period of short-term capital requirement.
Every Public and Private sector bank offers working capital loans to the business owners. Some NBFCs’ and credit societies also offer facilities with minimum application work.
Check out the benefits of working capital loans:
Banks and other financial institutions are providing working capital with basic documentation and identity. To easily cater to the urgent need of capital, some FIs’ have even started online facilities to apply for the loan, and all the update regarding the application and approval can be monitored there. However, it is must to check the facilities provided by different banks and then apply for the loans. There are various schemes laid out by FIs’, and rate of interest and tenure may also vary. You can decide based on which particular scheme will suit the needs of your business.
Documents required to apply for a working capital loan:
No Collateral Requirement
Every business needs empowerment, but not every business owner has assets to put as security for the loan. The biggest win for business owners is, working capital loans are collateral-free. You can maintain your business even without putting any security at risk.
Flexibility of Use
You can control the number of funds you need for a particular purpose. It is completely up to your discretion to decide the use of funds. If you are running in some urgent financial crunch and need immediate cash, you can use the funds available in your loan account for redressing the concern. Working capital loans are the best for contingency funds.
As you get into the agreement with the bank for the repayment of the EMI and monthly interest, you enjoy the complete ownership of your business. There can be no interference from the lender. Just ensure timely payment of Interest and EMIs’, and you will have easy access to all the facilities provided with the loan.
Applying for a loan may seem to be cumbersome but, it is quite easy nowadays to avail working capital loan. You can approach any financial institution and present the relevant documents required for processing. With the help of a credit line available at your end, you can manage the short-term liquidity crunch easily.
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