Business Working Capital Loan

Working Capital

A Working Capital Loan Will Fund The Daily Or Short-term Operations Of Your Business. This Usually Covers Salaries, Wages, Management Of Your Inventory And Rent, Etc. This Loan Is Not Availed For Business Expansion And May Not Ensure Long-term Stability. Working Capital Loans Are Usually Only Applicable To Small And Medium Enterprises And The Usual Period Of The Loan Is 6-12 Months. There Are Various Types Of Working Capital Loan And You Can Avail Any Of Them, Depending Upon The Need Of Your Business. These Are:

 

Short-term loan:

This is a loan that comes with a fixed interest rate for 12 months. As long as the business has a good credit history, such loans can be obtained without the need of giving collateral. Such loans may also have a policy requirement like sales targets that you need to achieve.

 

Accounts Receivable loan:

An Account Receivable loan is a loan taken out by a business to fulfil sales orders that have already been placed. You need an excellent record to avail this loan. Lending institutions might be hesitant in providing this loan to new companies.

 

For self-employed professionals, the following documents are required:

 

Proof of both Identity and Residence

PAN Card

Passport

Voter ID

Driving License

 

Address Proof for both Office and Residence

Rental Agreement copy or

Lease Agreement

Electricity Bill

 

Ownership Proof

Agreement Copy or

Electricity Bill or

Maintenance Bill or

Municipal Tax Bill or

Share Certificate

 

Business Continuity Proof

Shop and Establishment Certificate

Tax Registration Certificate

 

Firm Constitution

MOA

AOA

Partnership Deed

GST Registration Certificate

Form 32

 

Financial Statements

Last 2 years audited financial statements

IT Returns for last 2 years

Last 3 years Tax Audit Report

Latest GST Returns

Last 1 year Bank Statement

 

Bank overdraft:

Also known as Cash Credit, a Bank Overdraft is a type of working capital loan as the bank allows the business to overdraft their account when needed. This means the amount you avail is a pre-approved limit that your lending institution allows you to use. The interest rate for such overdrafts is fixed and is usually higher than the prime rates of the bank.

 

Trade Creditor:

This type of working capital loan is extended to the business by the creditors of the business; usually, the suppliers. This facility is generally offered on placing bulk orders. However, trade creditors usually have strict policy parameters to be followed by the borrower.

Equity Funding:

Equity funded working capital loans are acquired through personal resources or investors, such as investment from friends or family. These working capital loans are mostly taken by start-ups and businesses with a less than ideal credit score. Of businesses that have a bad credit history or businesses that are just starting, hence having no credit history, this is the best option.

Factoring loan:

This type of loan works similar to accounts receivable loans. The difference lies with the credit in question. Factoring loans work of the credit towards the business. For example, where a business accepts credit for products sold, the payments are still due on the sold items.

salaried employee or a business professional can apply for this loan who are in the age range of 18 to 65 years. For salaried individuals, the following documents are required:

Proof of both Identity and Residence

PAN Card

Passport

Voter ID

Driving License

 

Proof of Income

Last 3 months’ Salary slips

Last 6 months’ Bank Statements

Latest Form-16

Last 3 years’ IT Returns