Financial urgency or monetary requirements can occur at any point of time for companies and self-employed professionals. To overcome this situation they generally opt for working capital loans. Micro, Small & Medium Enterprises (MSMEs) whether big or small, need financial funding at one point of time or another to cover the expenses of their daily business operations.
The banking sector in the country is quite competent in providing different types of loans to its customers for their various financial needs. Considering their needs, working capital loans were introduced to fulfil the financial requirements of the companies, business owners and self-employed professionals.
|Working Capital Loan – Features|
|Interest Rate||Depends on applicant’s profile & varies from bank to bank|
|Age Criteria||Min. 18 years & Max. 65 years (At time of loan maturity)|
|Loan Amount||Depends on business requirements|
|Repayment Tenure||12 month – 84 months|
|Processing Fee||Up to 3% of the loan amount|
|Loan offered to||Entrepreneurs, Pvt. & Public Ltd. Companies, Partnership Firms, Sole Proprietorship, MSMEs & Self-employed Professionals|
|Interest Rate Type||Floating Rate of Interest – Mostly|
|Business Tenure||Min. 3 years in business with profit|
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the bank and RBI. GST and service tax shall be levied extra on the mentioned charges.
Working capital loans are availed majorly by companies doing businesses related to manufacturing, providing services, retailing, stocking, distribution, restaurants, supermarkets, multi-brand outlets, departmental stores, etc.
Working capital loans are used to cover accounts, payables, wages, and other similar needs. Companies and businesses that witness high seasonality and fluctuating sales cycles usually rely on working capital loans to help with periods of reduced or lean business activity. In the case of loss or stagnation in business, these loans become a necessity for some companies and businesses.
Working capital loans are largely offered to MSMEs and are not for large corporate companies. The loan is intended only for Micro, Small, and Medium Enterprises for meeting their daily operational needs and ensuring they have funds for the daily operational expenditure. The majority of the working capital loans are unsecured.