Working Capital

Working Capital is that amount which every business organization need to meet its day to day running expenses. The funds are required to fulfill the short term operational needs of the business organization.

Working Capital = Current Assets – Current Liabilities

This loan provides the financial support to the business entities especially to small and medium enterprises to manage their daily cash flow. Many times it happens that the business entities find it difficult to meet their current liabilities i.e. daily expenses, hence this cash flow gap is bridged by working capital loan so that the operations can run smoothly.

Types of Working Capital Loan

Bank Overdraft / Credit Line

These are the specific loan amount provided by the banks and NBFCs to meet the need of working capital financing of small and medium businesses. In this, loan can be taken only up to the approved limit. Borrower can use the funds as per the requirement and pay interest only for the amount utilized not for the whole approved amount.

Short Term Loans

This is the small tenure loans repayable up to 12 months. These loans are provided by the banks and NBFCs and private lenders. The terms and conditions of these short term loans depends on the credit history and working relationship with the lender.

Trade Creditors

This is the simply the credit period provided by the trade creditors on the purchase from them. This credit period is provided based on the credit worthiness of the business or the mutual relationship of creditor and the borrower. Credit worthiness of the business may be judged by its previous profitability ratios, payment history, and liquidity position of the business.

Discount of Bills

Commercial banks provides the loan by discounting the account receivables also. The seller can go directly to the banks and get these discounted at the current prevailing rates. Bank will give the money to the seller and collect payment from the debtor on the maturity of that bill. Banks generally accepts the accounts receivables of reputed debtors who have good track record of paying debts.

Bank Guarantee

Bank Guarantee is said as a promise by the bank to the vendor, to pay the liabilities of its client in case of any failure from the side of its client. We arrange the Bank Guarantees for you from reputed banks with simple documentation.

Letter of Credit

It is a non-fund based working capital finance. A buyer purchase a letter of credit and send the same to the seller. Seller as soon as sells and deliver the goods or services, can ask the bank for the payment.

Factoring or Advances

This is a source of funding working capital by selling all or some of the accounts receivable to a third party at a value lower than the original value. In this the loan amount depends on the future expected credit card receipts. Basically this type of financing is related to the business who are receiving the large number of payments through credit cards.



  • Age 25-55 years.
  • Business vintage of at least 3 years.
  • Minimum turnover of Rs. 20 lakhs per year.
  • ITR of at least 2 years.

Documents Required

  • Passport size photograph.
  • KYC Documents.
  • Certificate of Business Existence.
  • Financial Documents.