Extending Your Working Capital Loan? Find A Facility That Suits Your Need

Every company requires cash to run its daily operations. When it does not have enough revenue to do so, it is a good idea to take a working capital loan. It is possible to extend a previously taken loan too.

Every business, whether big or small, runs on four factors of production: land, labour, capital and entrepreneurship. Though all these factors are important, one could say that capital is probably the most important wheel that runs the business on a regular basis. Without money, no enterprise or company will be able to run.

What is Working Capital?

The money that an entrepreneur uses to run the day-to-day operations of an undertaking is called working capital. Working capital is what remains of a company’s current assets after deducting its current liabilities or debts. Current assets can include inventory, payments receivable as well as marketable securities. These when sold or converted into cash are one of the ways a company is able to raise cash or funding for daily operations.

What is a Working Capital Cycle?

The amount of time it takes to turn a company’s assets into cash is called a working capital cycle. Since every company deals with different kind of assets, the working capital differs from industry to industry and also within the industry itself. If a company raises enough working capital to pay off its debts and fund its everyday operations, we say that it is efficiently managed. This means that a company is able to free up cash almost instantaneously by shortening its working capital cycle.

Why is the Working Capital Cycle Important?

A company’s ability to raise working capital is in an indicator of how well it is performing in areas such as clearing its inventory, debt management, revenue collection and payments to suppliers. Because of the different nature of industries and the good and services that they deal with, it is practically not possible for all companies to convert their current assets into money to service their debt, which may include paying their suppliers, accrued expenses and notes payable.

When Are Working Capital Loans Needed?

It may so happen that due to the nature of its business, your company, at a given moment, may not have enough money to run its daily operations and fuel its expansion plans. To cope with this scenario, a company may borrow a working capital loan. You should keep in mind that a working capital loan is not taken to buy long-term assets, but to take care of immediate and short-term needs. Some working capital loans are unsecured, meaning that there is no compulsion for you to provide collateral to secure the loan. Try to take such a Working Capital Loan for your business.

What Should You Watch Out When for Taking a Working Capital Loan?

With a working capital loan, you are in a position to deal with any financial difficulty that may arise. You may use it to cover unforeseen losses or find that you need to meet additional expenses and you have not generated enough revenue to do so as your business is seasonal.

A working capital loan is structured in such a way that it helps to inject money that you require for your short term needs. Although approval for working capital loans is granted more rapidly than a personal loan or home loan and much less paperwork is involved, taking a working capital loan is not always easy.

You have to consider your capacity to repay the loan, which means you have no excuse not to pay the EMIs if your business does not do well or even fails. Due to their high risk element, working capital loans are likely to carry high interest rates. All this means that you need to be in a firm financial position and just need a little support by taking a working capital loan.

Bajaj Finserv offers Working Capital Loans of up to Rs.30 lakh to help you continue running your business without any financial roadblock.

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