Managing working capital is an integral part of achieving long-term success for a business. If you can’t manage cash flows properly to have readily available capital to cover day-to-day expenses, your business will suffer. Therefore, it is essential to determine how much money you are left over after all your short-term debts. If a shortfall is anticipated, it can be compensated for with a Working Capital Loan to tide your business over.
What is a Working Capital Loan?
Working capital loans (also known as operating capital loans) are used to cover the daily needs of your business. These loans are typically used to fund the working capital requirements or day-to-day operations of a company, from rent and overheads to employee salaries. Another advantage working capital loans offer is that business owners can use the capital infusion from these loans to expand their businesses and invest in plans like product expansion and renovation of their premises, without affecting their assets and profits. This is especially beneficial for micro-small-and-medium enterprises (MSMEs), which operate on limited liquidity and marrow margins. Working capital loans can support them with the financing they need to make the most of opportunities and keep growing.
Benefits a Working Capital Loan
Working capital financing can offer essential funding to cover day-to-day operational expenses for MSMEs. Here are some of the key benefits of obtaining a working capital loan:
Regulating Cash Flow: One of the primary advantages of a working capital loan is that it helps businesses maintain smooth cash flow. It ensures that a company has enough liquidity to cover its short-term obligations such as payroll, rent, utility bills, and inventory purchases.
Seizing Opportunities: Lucrative opportunities arise for MSMEs, which require immediate capital investment, such as bulk purchasing of inventory at discounted rates or launching a new marketing campaign. A working capital loan allows businesses to seize these opportunities without disrupting their cash flow or sacrificing other essential expenses.
Supporting Growth: A working capital loan can provide the necessary funds to fuel expansion initiatives, such as hiring additional staff, investing in new equipment, or expanding into new markets.
Uninterrupted Operations: Insufficient working capital for business can lead to disruptions in business operations, such as delays in fulfilling orders or inability to pay suppliers on time. By securing a working capital loan, businesses can avoid such disruptions and maintain their reputation and relationships with customers and suppliers.
Credit History: Timely repayment of a working capital loan can help businesses build a positive credit history, making it easier to qualify for larger loans or lines of credit in the future. Timely repayment of working capital interest demonstrates financial responsibility and reliability to lenders and improves overall creditworthiness.
Emergency Readiness: Unforeseen circumstances such as equipment breakdowns, natural disasters, or sudden changes in market conditions can strain a company’s finances. Having access to a working capital loan provides a safety net during emergencies, allowing businesses to address unexpected expenses without depleting their cash reserves.
Grow your MSME with collateral-free business loans
Ways to Use a Working Capital Loan to Grow Your Business
There are a multitude of uses of working capital financing for MSMEs. Here’s all you need to know about working capital loans and how small business entrepreneurs can utilize them to grow their businesses:
- A working capital loan will provide the cash you need to fund the short-term requirements or working capital expenses of your business, making room for long-term growth.
- These loans are intended to cover short-term expenses, so they are usually approved quickly, and with minimum documentation requirements, helping you seize lucrative market opportunities as they arise.
- These loans cover day-to-day operating costs for small business owners, who might encounter cash flow issues. Well-regulated cash flows are a pillar of business growth.
- A working capital loan can help you repair equipment, invest in training, or provide the funds you need to grow your company.
- Working capital loans will also help you take on projects that require a decent long-term investment but won’t pay off right away. Taking up these opportunities can fuel your business growth in the long term.
- You can invest working capital loans into the expansion and improvement of your operations and business premises, as well as to hire and train more staff. All of this adds up to the overall growth of your business, resulting in significant boosts in turnover and profits.
Why Choose Kinara Capital ?
Kinara Capital is an NBFC that understands the needs of MSMEs and hence, has curated products specifically designed to fulfil their needs. Kinara offers collateral-free working capital loans for MSMEs, which can be accessed through an end-to-end digital process through the myKinara app. In just one minute, you can check your loan eligibility and proceed to apply for a loan. With Kinara’s proprietary AL/ML-led decisioning models, the loans are disbursed in just 24 hours! This means that you can finance emergency expenses or seize timed opportunities with ease by taking a working capital loan from Kinara.
Apply for a Working Capital Loan in 2 Easy Steps:
- Take a 1-minute eligibility check on our website
- If eligible, our Kinara loan officer will reach out and guide you through the next steps in your preferred language.
Documentation Requirement:
- Personal: Aadhaar card, PAN card, Driving License, or Passport.
- Address proof for business and personal premises
- Finance proof: ITR papers, GST filings, banking statements or copies of passbooks over the last two years.
- Company-related documents: Proof of business turnover for sole proprietors, certificates of firm registration.
How a Kinara Customer have benefited by availing a Working Capital Loan
Customer Name: Anupama Chenna, Company Name: Sri Padmavathi Enterprises
“We got a working capital loan of Rs. 5 lakh from Kinara and bought raw materials with it. Since then, our business has improved significantly and our turnover has increased to Rs. 15 lakh in 8 months.”
Conclusion
Working capital is one of the most vital elements responsible for keeping the operations of a business running smoothly. It is critical for a business to keep healthy working capital to maintain cash flow and keep up their growth momentum. Working capital loans are a lifeline for MSMEs, helping them bridge any gaps in cash flow or financing for expansion plans. There are myriad uses of working capital loans, from covering day-to-day expenses to tiding over seasonal demand swings and emergency expenses. If used correctly, these loans can become the engine that fuels long-term growth for MSMEs.
NBFCs like Kinara Capital have tailored working capital loans to suit the needs of MSMEs. By downloading the myKinara App and checking your eligibility in just 1-minute, you can be on your way to getting a collateral-free working capital loan for your business in just 24 hours.
FAQs
How does a working capital loan differ from other types of business financing?
Working capital loans differ by focusing on short-term needs like day-to-day expenses, while other financing may target long-term investments or specific assets.
What are the key eligibility criteria for securing a working capital loan?
Key eligibility criteria for a working capital loan include a business’s cash flow stability, and operational history.
What factors do lenders typically consider when evaluating a working capital loan application?
Lenders evaluate factors such as the business’s revenue trends, profitability, and the purpose of the loan when considering a working capital loan application.
How soon can I expect to access funds after applying for a working capital loan?
With Kinara Capital, you can expect your working capital loan to be disbursed within just 24 hours.
Are there any specific industries or types of businesses that are more eligible for a working capital loan?
While specific industries might not factor in, businesses with stable revenue streams and consistent cash flow are often considered more eligible.
How can I determine the right amount of working capital loan for my business?
By assessing your business’s current and future cash flow needs, considering factors like seasonal fluctuations, growth plans, and operational expenses.
