What is working capital finance?
Working capital finance funds the gap between paying suppliers and getting paid by customers — stock, receivables, salaries and day-to-day expenses. Instead of a lump-sum loan, most working capital facilities are revolving limits: you draw what you need, repay as cash comes in and pay interest only on the amount used.
Working capital facilities we arrange
Cash credit (CC) limit
A revolving limit secured primarily by hypothecation of stock and book debts. Your available limit (drawing power) moves with the value of current assets you declare each month in your stock statement.
Overdraft (OD) facility
A limit on your current account that lets you draw beyond your balance, commonly secured by property (OD against property) or fixed deposits. Well suited to businesses with uneven cash flows.
Working capital demand loan (WCDL)
A short-term loan carved out of your working capital limit for a fixed period, often priced lower than a running CC account.
Working capital term loan (WCTL)
A term loan with EMIs used to fund the permanent part of working capital, or to regularise a stretched cash cycle.
Bill discounting and trade finance
Funding against invoices and export/import bills, and non-fund based limits such as bank guarantees and letters of credit.
How banks decide your working capital limit
Lenders look at your turnover, your operating cycle (inventory days + receivable days − payable days), your margin, the quality of current assets, your repayment track record and the collateral offered. For smaller limits many banks use a turnover-based method; for larger limits they assess projected balance sheets using CMA data. A well-prepared CMA is often the difference between the limit you need and the limit you get.
When should you consider a takeover of your limits?
- Your current bank has not enhanced limits in line with business growth.
- Your interest rate or processing charges are above what similar businesses are paying.
- Collateral requirements or margins are higher than your profile justifies.
- You want to consolidate limits spread across several lenders.
Documents typically required
- Company and promoter KYC
- Last 3 years' audited financials and ITRs; provisional financials for the current year
- GST returns and 12 months' bank statements
- Latest stock and debtor statements, and debtor ageing
- Existing sanction letters, if any, and collateral documents
Frequently asked questions
What is the difference between cash credit and overdraft?
Cash credit is typically secured by stock and receivables, with drawing power linked to the value of those current assets. An overdraft is a limit on a current account usually secured by property or deposits, and is not tied to monthly stock statements.
How much working capital loan can my business get?
It depends on your turnover, operating cycle, profitability, credit history and the collateral offered. We review your financials and give you an indicative range before approaching lenders.
Can I get an unsecured working capital loan?
Unsecured working capital and business loans are available from banks and NBFCs for businesses with strong financials and credit history, usually for smaller amounts and at higher rates than secured limits.
Can you help increase my existing CC limit?
Yes. We prepare the enhancement proposal with updated CMA data and, where your current lender is not responsive, explore a takeover by another bank.