6 benefits of working capital finance for small & medium businesses
With working capital loans easily available for SMEs, achieving your business targets has become easier. Here’s a look at the 6 benefits your business stands to gain from working capital finance.
As your business grows, its financial requirements also increase. While revenues may peak during the festive season for most businesses, it is also likely to suffer during lean periods. This can pose a threat to maintaining stable operations on a monthly basis. You can use Working Capital Loan for such situations. Listed below are the 6 major benefits of working capital finance to help you utilise this form of credit better.
6 benefits of working capital finance
Fuels short-term needs: Working capital loans are easy to secure and help you meet short-term requirements. They have flexible repayment tenors to help you plan your payments better too.
Eliminates collateral: The biggest advantage of working capital loans is that they are unsecured. For most loans, pledging collateral is essential as it acts as an assurance of repayment. However, this isn’t ideal as it puts your business assets and personal valuables at risk. Working capital loans save you from this hassle.
Makes it easier to get financing: You can easily apply for a working capital loan online and will have to submit only a few documents. As a result, the process is easier for you and funds are disbursed faster.
Maintains cash flow: Irrespective of your requirement and monthly revenue, working capital financing helps maintain good cash flow for your business. This means that your business gains stability and financial strength for urgent or unexpected needs.
Provides a line of credit facility: Another benefit is that these loans provide you with the facility of line of credit wherein you can withdraw the amount according to your needs via a credit line. On a monthly basis, you only have to pay the interest in the form of EMIs and the principal amount has to be repaid only at the end of your tenor.
Preserves ownership: If you have venture capital backing your business, you have to share your ownership privileges with someone else. You cannot take all decisions and there is a constant risk of losing the funders and investors if anything goes wrong. But with working capital loans, you remain the sole owner of your business. The decisions you make and the strategies you draw up are entirely in your control.
Eligibility and documents:
To be eligible for a working capital loan, your business must fall under one of the following categories:
1) Limited or private limited company
2) Partnership or proprietorship firm
3) Self-employed professional
4) Self-employed non-professionals
1) Application form and passport photographs
2) KYC documents
3) Certificate of practice
4) Business vintage proof of 3 years
5) Bank account statement of the previous month(s)