5 Ways to Utilize a Working Capital Loan in 2024

June 11, 2024
Updated on

Keeping a close watch on the working capital is a must for successful businesses. It ensures the survival of routine business operations and is a reliable determiner of the overall financial health of an enterprise and capacity for growth. 

Small business owners often confront cash flow concerns and stand at risk of being unable to meet their short-term financial obligations, especially in the initial stages of business. 

What Is MSME Finance?

If you’re unfamiliar with MSME finance, it stands for Micro, Small and Medium Enterprises financial solutions. It’s essentially a financing scheme offered by various lenders that empowers MSME business owners and entrepreneurs to secure the resources they need to cover various business costs and keep their day-to-day operations running smoothly.

A working capital loan is a form of MSME finance that allows small business owners to meet all regular business expenses such as purchasing raw materials, paying wages, renovating premises, and others. However, not knowing how to effectively utilize a working capital loan can prevent small business owners from ensuring sustainability.

5 Ways of Utilizing Working Capital Loan 

Cash flow management:

As soon as your MSME finance loan is approved and disbursed, you need a plan to manage the cash flow. Identify the periods when your business goes through a cash crunch or when large orders may come in and plan your expenditures accordingly. Thus, properly managing the working capital for MSMEs ensures that one can navigate these fluctuations effectively.

Invest in inventory:

If you’re thinking about how to use working capital loans, let us tell you that one of the best ways to utilize the working capital loan is to restock your inventory to meet the present and future demands of your customers. With your inventory stocked, you can also plan discounts to invite more sales.

Planning for seasonal shortfalls:

If you are in a seasonal business, the chances are that you are expecting a drop in sales or a delay in payments. A working capital loan can help you meet all your routine expenses, such as rent, salaries, and supplier invoices in the off-season to ensure survival. Understanding the various working capital loan uses can help you efficiently manage your finances during these periods.

Renovate and expand:

MSME finance is one of the best mediums for you to renovate your premises and eye business expansion. Renovations can enable small manufacturers to make the workplace safe for their employees. On the other hand, if you are in the retail business, a revamp can uplift the aesthetic value of your enterprise and invite more customers. You can also use a working capital loan to relocate to a better location.

Hiring more employees:

Another great way to utilize your MSME finance is to hire more people for the job. Hiring more employees can make operations efficient and expedite growth plans.

Grow your MSME with collateral-free business loans

Applying for a Working Capital Loan at Kinara Capital

Kinara customers can avail of a short-term or long-term working capital loan ranging from Rs 1 lakh to a maximum of Rs 30 lakhs. The option of short-term working capital is available to our existing customers who can apply for any amount between Rs 50,000 to Rs 200000 for a tenure of 6-12 months. The short-term loans are disbursed immediately and are intended to facilitate the immediate financing needs of small business entrepreneurs. 

Our minimal documentation allows you to substitute some documents in lieu of others, depending on the availability. In order to apply for a working capital loan at Kinara Capital, you will need the following documents:

  • The KYC document of the applicant (PAN Card)
  • The KYC documents of the co-applicant (PAN and Aadhaar). These documents are recommended but not mandatory
  • Proof of business registration. This will include your Udyam Registration.
  • Submission of GST and ITR documents is optional 
  • The bank statement for the last 12 months

Here is a quick rundown of the features of our working capital loan:

  • The working capital loan at Kinara Capital does not require any collateral 
  • The loan application is completely digital and available in 7 languages. It can be completed by the customer or with the help of a professional Kinara representative
  • As soon as the loan application is completed, the loan is disbursed within 24 hours
  • The acquired amount can be used to meet a plethora of business expenses such as paying wages, fixing a machine, upgrading inventory, adding a new product or even renovating the business premises. 

So, propel your business plans today with a collateral-free working capital loan from Kinara Capital!


Optimizing working capital for MSMEs is the lifeblood of any small business’s success journey. This blog post has delved into the concept of MSME finance and provided actionable tips on how to harness the power of a working capital loan to tackle various business challenges.

By implementing strategic cash flow management, strategically investing in inventory, preparing for seasonal sales variations, renovating and expanding your operations, or even bringing on new team members, you can ensure the seamless operation and financial well-being of your MSME. Keep in mind, Kinara Capital offers unsecured working capital loan solutions specifically designed to fuel the growth of small businesses like yours. Head over to our website to explore our offerings and ignite the next chapter of your business success story!


1. What are the common sources of working capital?

Long-term working capital comes from sources like long-term loans, money set aside for equipment wear and tear, profits kept in the business, company bonds, and selling shares. Short-term working capital usually comes from NBFCs and banks and includes public deposits, cash credit, and money kept aside for dividends or taxes.

2. What are the risks of inadequate working capital?

Inadequate working capital leads to cash flow issues, missed opportunities, and challenges in meeting financial commitments. This may cause delayed supplier payments, reduced inventory levels, and an inability to capitalise on growth opportunities.

3. How does working capital management differ across industries?

Working capital management isn’t a one-size-fits-all approach. Retailers prioritise inventory control to find the sweet spot between enough stock and healthy cash flow. On the other hand, manufacturers need substantial working capital to keep raw materials flowing for production. Service industries focus on managing cash flow for operational costs and payroll, with less emphasis on inventory. Ultimately, each industry faces a unique balancing act of readily available cash, outstanding customer payments, and upcoming payments to suppliers.

4. What are the key metrics used to evaluate working capital efficiency?

Key metrics for working capital efficiency include the current ratio, showing a company’s ability to cover short-term debts, and the quick ratio, which excludes inventory. Inventory turnover measures how quickly goods are sold and replaced, while receivables turnover indicates how fast customers pay. Payables turnover reveals how efficiently a company settles its bills with suppliers.

5. How can businesses optimize their working capital cycle?

Optimising the working capital cycle is about getting customers paid faster, paying suppliers a bit slower, and keeping just the right amount of inventory on hand. Businesses can do this by offering discounts for early payments, negotiating longer payment terms with suppliers, and using just-in-time ordering to avoid stockpiles. By managing these areas well, companies can free up cash flow and be healthier financially.

6. What are the potential benefits of effective working capital management?

Effective working capital management can lead to improved cash flow, increased profitability, enhanced liquidity, and better overall financial health for the company.

7. How can small businesses use inventory management techniques to optimize their working capital?

Small businesses can improve their cash flow by managing inventory wisely. They can do this by only ordering what they need when needed, accurately predicting how much they’ll sell, and avoiding keeping too much stock on hand. This way, they use their money wisely and always have what customers want.

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