What is a working capital loan?
A working capital loan helps businesses manage filling the gap of payment cycle such as inventory purchase, salaries, rent, utility bills and tenders.
What is the working capital formula?
The working capital formula is used to measure a business short term financial health. It is calculated as,
Working Capital = Current Assets - Current Liabilities
What is the eligibility for a working capital loan?
Working capital loan eligibility usually depends on business vintage, annual turnover, credit score, and repayment capacity.
What is the interest rate on a working capital loan?
Working capital loan interest rates vary based on loan type, business profile, and lender policies, typically starting from competitive market rates.
What documents are required for a working capital loan?
Common working capital loan documents include KYC proof, business registration, bank statements, and financial records such as GST returns or ITRs.
How quickly can I get a working capital loan approved?
Depending on the lender, working capital loan approval can take anywhere from 2 to 7 working days after document submission.
What is the difference between working capital loan and line of credit?
A working capital loan offers a fixed amount with scheduled repayments, while a working capital line of credit allows you to withdraw funds as needed and pay interest only on the used amount.
Can MSMEs and startups get working capital funding?
Yes, working capital loans for MSMEs and startups are widely available, provided the business meets basic income and operational requirements.
How can a working capital loan EMI calculator help me?
A working capital loan EMI calculator helps estimate monthly repayments in advance, making cash flow planning easier.
What are the different types of working capital?
Working capital is classified into several types based on business operations and financial needs. The main types of working capital include permanent, temporary, gross, and net working capital.
What is the working capital ratio?
The working capital ratio, also known as the current ratio, measures a business’s ability to meet its short term obligations using its short term assets.
Formula,
Working Capital Ratio = Current Assets ÷ Current Liabilities
What is a good working capital ratio?
A working capital ratio between 1.5 and 2.0 is generally considered healthy, as it shows the business can comfortably cover short term liabilities.
What is the working capital cycle?
The working capital cycle (WCC) is the time it takes for a business to convert its net current assets like inventory and receivables into cash. It measures the efficiency of a company’s short period operations and liquidity.
Formula,
Working Capital Cycle = Inventory Period + Receivables Period - Payables Period
What are the types of working capital?
1. Gross Working Capital
2. Net Working Capital
3. Permanent (Fixed) Working Capital
4. Temporary (Variable) . Working Capital
5. Reserve Working Capital
What are the Features of Working Capital?
1. Short term in nature
2. High liquidity
3. Essential for daily business operations
4. Continuously circulating
5. Varies with business needs and industry
6. Helps maintain short term solvency
What are the benefits of working capital?
Working capital ensures smooth day to day business operations by maintaining proper liquidity. It helps meet short term obligations on time, supports continuous production, and improves a firm’s financial stability and creditworthiness.
