Working capital, which is often referred to as the backbone or lifeblood of a business helps a company to manage its day-to-day operations and short-term liabilities. Regardless of the size of the enterprise, it is this readily available liquid cash that allows the owner to keep the business afloat. However, every business can experience sudden interruptions in cash flow or a down phase when even your savings fail to meet the emergency needs. This is where the option of working capital finance comes in as it can assist small organisations to easily move out of the financial crunch.
Financial experts often consider such financing options as highly beneficial as they do not ask for any asset or other form of collateral as a guarantee and are completely risk-free. For a better understanding, listed below are some more benefits of working capital loans that you can take a look at.
1. Can meet immediate expenses – Companies often go through a time when their income gets much lower than the expenses and it becomes difficult even to pay for the operating cost. Whether you wish to work on larger projects or pay for equipment repair, you can easily rely on the option of working capital loan. A major benefit of this loan is that it comes with flexible repayment terms and conditions.
2. Helps to maintain cash flow – Organisations that do not manage their cash flow often fail in the long run and end up dissolving. If you are facing a need to seek some financial help to maintain your cash flow, then working capital finance can be the best possible solution as you do not have to put anything at stake to obtain the loan. Also, it can assist you in maintaining monthly expenses, stock up inventory, and more.
3. Quick and easy process – As the loan is unsecured, you can easily apply for it online and will be asked to submit limited number of documents. Hence, the process becomes less tedious and the funds are disbursed faster as compared to other sources of finance.
4. Various tenure options – In order to align with the diverse requirements of organisations, this loan can be availed for a few months to a few years. It brings in the required liquidity for short-term to medium basis and hence, it gets easier for you to fund your growing operations.
Eligibility criteria for working capital loan
Any type of business entity such as sole proprietorship, partnership, privately-owned and publicly-owned can apply for the loan. All they require is minimum three years of experience and reasonable cash flow to provide assurance to the lender, regarding their ability to pay back the loan in the form of EMI.
The list of documents required is the application form, certificate of practice, KYC documents, and bank account statements of the past few months. However, the formalities may differ on the basis of the kind of lender you choose.
Conclusion
An organisation experiences financial stability only when there is a bridge between income and expenses. Any disturbance in this equation calls for immediate financial assistance in the form of working capital finance. This loan can be availed without any difficulty and its timely payment can also improve your credit history.