The Finance Minister of India informed that between March 1st and March 4th 2020, NBFCS and HFCs had been disbursed working capital loans worth more than Rs.77 crore by public sector financial institutions. This initiative was undertaken to ensure that lenders have ample funds to distribute among eligible borrowers across the country. Consequently, business-owners can now access funds with heightened ease.
Regardless of the business stature and sector, new entrepreneurs, as well as established business-owners, require funds to replenish their net working capital fund from time to time. In such situations, all they need is a credit product curated exclusively for this financial requirement.
However, before applying, business owners need to consider a few factors that can allow them to access the credit easily.
- Interest rate
The interest rate of a capital loan differs from lender to lender. Since the interest rate determines the EMI payable and the overall cost of borrowing, it is imperative for borrowers to compare the rates before making an informed decision.
Interest rates also depend on the credit profile of the applicant.
- Repayment structure
It plays a crucial part in availing credit for working capital fund. Business owners need to assess their current financial standing before applying for this fund. They should also take a look at the amortisation schedule that contains the breakups of all EMIs throughout the tenor for added convenience.
Business owners can further maximise the benefits of capital loan by choosing a flexi loan facility. It enables them to pay interest only on the funds utilised, thus significantly reducing the EMI burden.
Top financial institutions like Bajaj Finserv also provides funds up to Rs.45 lakh with flexible repayment facility.
They also extend pre-approved offers that simplify and expedite the credit availing process. Besides business loans, such offers are also available on a range of financial products like personal loans, credit cards and others. You can check your pre-approved offer instantly by entering your name and contact number.
- Eligibility criteria
Like any business loan, this credit is also collateral-free; thus lenders sanction the amount only to those who comply with the required eligibility parameters. For instance, the business credit score needs to be 750 and above to ensure guaranteed approval.
Following are a few other factors that determine the eligibility of an individual.
- The applicant must be aged between 25 and 65 years.
- The business vintage should be at least 3 years.
- Income Tax should be filed for a minimum of one year.
One’s eligibility for the working capital fund should also be supported by relevant documents.
- Documentation
Individuals need to submit a list of documents to access the funds instantly.
- Identity proof
- Address proof
- Financial documents
- Business ownership documents
Alongside these, individuals should also need to know how to calculate working capital requirements for their business. It will help them to reap maximum benefits from the credits availed.
Advantages of a working capital loan
Some of the benefits of availing a working capital are mentioned below.
- Business owners can address financial emergencies with much ease while they opt for this credit. They can use the funds to pay employees, bear overhead expenses, finance new product or service launch, etc.
- Borrowers can also choose shorter terms to mitigate immediate short-term liabilities. Generally, loan approval and disbursal requires less time.
- Since it does not have any pre-set condition on end-use, individuals can use the funds for other business-related purposes, such as increasing revenue, smoothing out daily expenses, etc.
Thus, this capital loan can help business owners tackle their finances more efficiently and maintain a steady cash flow. However, first, they need to know how to use working capital loans to strengthen their business and optimise operations.
