What Is A Working Capital Loan? Why Firms Need Working Capital Loan? Advantages of Working Capital Loan Types of Working Capital Loans Eligibility for working capital loan Documents required How to apply for a working capital loan

1. WORKING CAPITAL LOANS
in India
Pranav Kishor Choudhary

2. • A loan availed by the firms for covering their daily operational expenses.
• These loans are not used for buying long-term assets.
• Generally used for covering wages, accounts payable and other similar
operations.
• This loan is applicable for the small & medium enterprises.
• Majority of the working capital loans is unsecured.
• Loans with high risks need some guarantee.
• Usual duration of WCL in India is 6 to 12 months.
• Interest rate ranges between 11% to 16% depending on the lender.
WHAT IS A WORKING CAPITAL LOAN?
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3. • Seasonal sales fluctuations.
• Some firms work on a cyclical sales model.
• That depends on the requirements of the retailer.
• Retailers sells most of their products during the festival season
• Production during the off-seasons to fulfil the demands during the peak season.
• Companies need loan daily expenses during the off-season.
• The companies repay this loan as soon as they hit the busy season.
• Cash Cushion
• Non-steady cash flow
• For capitalising on an opportunity
WHY FIRMS NEED WORKING CAPITAL LOAN?
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4. ADVANTAGES OF WORKING
CAPITAL LOAN
• Safe loan amount
• No need for any collateral
• Quick application and approval process
• Spending money at one’s discretion
• Flexible withdrawals
• Pre-approved loan offers
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5. TYPES OF WORKING CAPITAL LOANS
• Term loan
• Bank guarantee
• Bill discounting
• Letter of Credit (LC)
• Line of credit (LOC)
• Cash credit/overdraft
• Packing credit
• Post shipment finance
• Equity funding from investors or personal resources
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6. Several other public and private banks and NBFCs in India offer working
capital loans to its customers.
LENDERS OF WORKING CAPITAL LOANS
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7. • One must be aged between 22-55 years.
• Business should be in operations for at least 3
years.
• Business’ income tax returns must have been filed
for the same period.
• If annual turnover last year was higher than Rs.1
crore, the financial statements would need to be
audited by a CA.
(The criteria vary from lender to lender)
ELIGIBILITY FOR WORKING CAPITAL LOAN
Source: Bajaj Finserv 7

8. DOCUMENTS REQUIRED
Documents Self-Proprietorship
Public and Private
Limited Companies
Partnerships
If your business’s turnover is > RS. 5 Crores, then one
has to produce the CMA report
Yes Yes Yes
Income tax return and income statement for the last
three years.
Yes Yes Yes
Audit report and audit Financials for the last two years. Yes Yes Yes
Loan statement with sanction letters in the last one
year (if any).
Yes Yes Yes
Loan statement along with the sanction letter of the
previous banks in the last one year (if any).
Yes Yes Yes
Name of all the present directories on company
letterhead
Yes
Partnership Deed Yes
Certificate of Registration Yes
Certificate of Incorporation Yes
PAN Card Yes
Memorandum of Association and Articles of Association Yes
Source: www.bankbazaar.co and ICICI BANK (Working Capital Loans) 8

9. There are two ways of sending in the application.
1. One can visit the lender’s official website,
download the form, fill in the details and send
in the application.
2. One can also visit the nearest branch, request
them for an application form, and submit it
with the documents.
HOW TO APPLY FOR A
WORKING CAPITAL LOAN
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10. • Banks - Almost all the major banks like SBI, HDFC, ICICI, Kotak and others offer
business loans to SMEs. If one is an existing current account holder, things gets
much easier.
• Paisa Bazaar (www.paisabazaar.com) - At Paisabazaar, one can get the
customised rate quotes on the working capital loans instantly without much
effort. Known as the first neutral online marketplace for instant quotes on
credit cards and loans.
• Biz2credit (platform.biz2credit.com) - Started in the year of 2007, has more
than 1,300 lenders and credible credit agencies, this website has become a
trusted source in the Indian financial industry. They use a patented technology
to offer the applicants lots of options from which they can choose one.
• Capital Float (www.capitalfloat.com) - Capital Float is a trusted source for
getting complete information regarding the process on how to get working
capital loans. They offer working capital finance for purchasing the inventory
and deal with the daily expenses.
SOME WEBSITES TO GET WORKING CAPITAL
LOANS IN INDIA
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11. • Loan Meet (www.loanmeet.com) - Loan Meet is a popular marketplace that
works on a peer to peer lending model. Through their website, one can
connect with the best lenders regarding the working capital loan and tell them
about their original requirements. One has to fill an online application that
generally takes up to 24 hours for approval.
• Namaste Credit (www.namastecredit.com) - Namaste Credit is a popular
marketplace that connects the borrowers with the lenders using a secure and
efficient lending platform. The majority of the forums has positive reviews
about the Namaste Credit on the internet.
• Capital First (www.capitalfirst.com) - Capital First Ltd is a leading Financial
Institution in India focused on providing debt financing to MSMEs and Indian
consumers. The company provides financing for various purposes like business
expansion, loans for Plant and Machinery, Office furniture, display panels,
office automation like PCs, laptops and printers
SOME WEBSITES TO GET WORKING CAPITAL
LOANS IN INDIA
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12. CONCLUSION
The business owners are aware of the fact that
sometimes the problem in dealing with the negative
cashflow can kill the business and that’s why a small
funding can be helpful in resolving short term
problems. The working capital loans can help the
business to function properly and efficiently. This
type of business loan can be one of the simplest
methods for protecting the credibility of a company.
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13. SOURCES
• ICICI BANK (Working Capital Loans) www.icicibank.com
• www.businessdictionary.com
• www.bankbazaar.com
• Bajaj Finserv www.bajajfinserv.in
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14. THANK YOU
Any Questions?
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