Working capital loans are used to assist companies with day-to-day operations. Working capital can be compared to a company’s lifeblood; without it, the business would come to a standstill. This highlights the significance of working capital for the survival of your business. It may be the difference between success and failure.
Importance of Working Capital for Small Businesses
Working capital refers to the current and short-term financial health of your business. In other words, it refers to whether the business has sufficient capital to finance the day-to-day requirements or not. If you do not have enough money to support expenses like maintaining cash flow, renovation of your premises, paying employees’ salaries and purchasing raw materials, then taking working capital loans for small business will be beneficial for you.
Insufficient cash flow is cited as one of the main reasons for the failure of businesses. A company’s failure might happen when the cash flow is inadequate to support wages, supplies, overheads, and other expenditures. This is mostly common in small and medium-sized companies. To cover upfront costs such as product growth, new location, space, new employees, and expansion, a significant amount of money is needed.
Factors that helps to get Working Capital Loan for Small Business
Solid Business Plan: A well-structured business plan showcasing strategy and profitability potential is essential for small businesses. This makes getting loans for asset purchase and working capital loans easier.
Consistent Revenue and Cash Flow: Demonstrating a track record of stable revenue and cash flow indicates the business’s ability to generate income. This makes it more appealing to lenders, as they can be assured of repayment.
Credit History and Collateral: Traditional lenders still rely on the two main metrics of credit history and collateral to gauge creditworthiness. However, new-age lenders like Fintech NBFCs are breaking out of this mold and taking multiple factors into account in order to make loan decisioning more efficient and inclusive.
Finding the Right Lender: Doing your due diligence to find the right lender for you is critical. Maintaining transparent communication and providing prompt and accurate financial reporting fosters trust, enhancing the business’s creditworthiness and chances of loan approval.
Benefits of Working Capital for Small Businesses in Various Aspects
Working Capital loans can support MSMEs in a variety of ways. They can tide over financial setbacks and unexpected expenses, as well as help fund day-to-day expenses and long-term growth plans. Let’s take a look at the benefits of working capital management through loans for MSMEs:
Maintaining Operations
For MSMEs to ensure maintaining operations, they have to have a steady cash flow, but there can be uncertainties in this regard. Untimely payments can have a severe impact on your business reputation, so you need a way to avoid such situations by bridging payment gaps. Your staff also relies on you for the timely payment of their wages. Often, small businesses do not get quick returns, and hence they do not have sufficient cash on hand. Taking working capital loans for small business can help you keep your operations running smoothly.
Managing Inventory
If you own a small business, you are likely to have experienced the need to maintain stock or buy inventory in advance. This is especially true for seasonal businesses, which rely on surges in demand at specific times of the year. Working capital loans for small businesses are perfect for fulfilling this need, as they can provide the necessary funding for inventory services on short notice, so that MSMEs can capitalize on seasonal demand.
Supporting Growth
MSMEs have limited liquidity and cash reserves. Hence, any expansion plans they have are likely to need an external infusion of funds, so as not to dip into their profit margins or other assets. Working Capital Loans are the perfect solution, supporting growth and allowing MSMEs to finance their plans without hampering their regular operations.
Taking Advantage of Opportunities
One major factor that fuels the growth of MSMEs is their agility and ability to make the most of every opportunity. However, this can be hindered if the MSME in question has insufficient funding to seize market opportunities like demand surges and big orders. Working Capital Loans can bridge this gap and ensure that small businesses have enough funding to make the most of opportunities as they arise.
Enhancing Creditworthiness
Efficiently repaying a loan is the best way to enhance your credit score. For MSMEs, taking a Working Capital Loan that they can comfortably service, and seeing it through to timely repayment, is the first step to boosting creditworthiness.
Kinara Capital is here for you
Kinara Capital provides fast and flexible working capital loans to small businesses. We provide business loans in the range of Rs. 1 to 30 lakhs to MSMEs in the manufacturing, services and trading sectors.
Why choose Kinara Capital?
- Get your loan in 1 day.
- Minimal documentation requirements.
- No property collateral is required.
- Personalised customer service.
- Interest Rate: starting at 24% per annum, on a reducing rate basis.
- Loan Tenure: 12-60 months
What Kinara Customers have to say:
Customer Name: Ilyasbhai Memon, Company: Royal Enterprise
“We had been running the business for a few years, but when we applied for working capital loans for small business, all banks denied us. Kinara Capital approved our loan right away and gave us a second loan a year later. We had some relief in running our business and achieved a successful outcome. We were also able to increase the number of staff, as our number of customers and workload increased since taking the loan.
Customer Name: Saraswathy, Company : Saraswathy Steel
“When I started this business, we had 7 workers. Now, I am providing consistent jobs and livelihoods to 25 workers, and they are so delighted. Kinara is the reason for my business growth. I hope that Kinara Capital will continue to help meet our business needs in the future. I would recommend for everyone who needs it to take working capital loans for small business from Kinara Capital.”
Conclusion
Small businesses have immense potential for growth and drive socio-economic impact on many levels. However, they are plagued by limited liquidity and limitations arising from it. One great solution for MSMEs to finance day-to-day expenses and fuel growth plans is to opt for Working Capital Loans. These loans can help them finance their operations, regularize cash flows, and tide over unexpected expenses. They can also support them in actualizing long-term growth plans, by providing them with the capital they require.
FAQ
1. What types of working capital loans are available for small businesses?
Small businesses can access a range of working capital loans, including long-term or short-term working capital loans, overdrafts, invoice financing, bank guarantees, and letters of credit.
2. What do small businesses need to qualify for working capital loans?
Different lenders have varying criteria for loan eligibility, but broadly, small businesses need to be registered entities and have the necessary documentation to be able to qualify for a working capital loan.
3. How quickly can small businesses get funds from working capital loans?
With Kinara Capital, small businesses can get their working capital loan in just 24 hours!
4. Can small businesses with bad credit get working capital loans?
Traditional lenders have strict criteria around credit score for loan decisioning. However, new-age fintechs like Kinara Capital consider a variety of factors when gauging creditworthiness. Depending on how low the score is, it’s possible to get a working capital loan.
5. What mistakes should small businesses avoid when applying for working capital loans?
Small businesses should do their due diligence to choose a lender and loan product that suits their needs. They should also steer clear of dubious lenders and offers that seem too good to be true.
