Working Capital
Running a business smoothly is no easy task as it requires a constant flow of funds to maintain the operation line and different services. And, sometimes, it becomes challenging to generate enough cash flow to sustain operations due to various factors.
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Different Types of Working Capital Loan
Short-Term Loan:
Suitable for meeting short term funding requirements in business, the loan type comes with a fixed interest rate and has a loan tenor of up to 12 months.
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Long-Term Working Capital Loan:
The loan type is suitable for meeting planned capital expenditure or capacity expansion and has a tenor of up to 60 months. It includes overdraft facility, letter of credit, bank guarantee, trade credit, etc.
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Unsecured Working Capital Loan:
These are collateral-free business loans having a flexible repayment tenure ranging between 12-36 months.
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Cash Credit / Overdraft
This is a very simple facility that does not tax the business too much in terms of complexity. The main features of this type of working capital loan are to generate funds in need with a low rate of interest.
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There are various factors into consideration before being sanctioned a working capital loan, they may pertain to evaluation of the entire repayment history and analysis of eneterprise valuation.