- KredX Editorial Team
- 15 Mar 21
- Working Capital

The working capital of a business is an indicator of its operational efficiency and short-term financial standing. A lack of optimum working capital obstructs supply chain management and hinders a company’s day-to-day activities. Needless to say, enterprises must maintain a steady flow of working capital.
When faced with a shortage of adequate working capital, business owners can finance their operations through working capital loans. This article elucidates the steps to avail a working capital loan in India.
Step 1: Select Your Preferred Type Of Loan
The Indian financing market offers a variety of working capital loans. An individual can choose from the following types:-
Short-term Working Capital Loan
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Long-term Working Capital Loan
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Unsecured Working Capital Loan
Step 2: Check Eligibility
Such loans are largely offered to self-proprietorship, partnership and public, and private limited companies. Furthermore, the eligibility criteria for a working capital loan differ across lending institutions. Highlighted below are a few basic requirements:- Applicant must be aged between 25-65 years
- A business vintage of at least 3 years (6 months in some cases)
- A CIBIL score of over 700
- No previous defaults with any financial institution
Step 3: Evaluate The Key Factors
Before business owners apply for a working capital loan, it is imperative that they take into account some notable factors, such as:-
- Rate Of Interest: The interest rate for working capital loans varies with every financial institution. It generally ranges from 12% to 16%, wherein long-term loans have lower interest rates than short-term loans.
- Tenure Of Repayment: The usual tenure of repayment remains 12 months for short-term loans. A long-term working capital loan can be paid off in a period of 3 years or longer.
- Processing Fee: It is an upfront cost borne by a borrower against the services extended by his/her lending partner. This fee typically amounts to 2.5-3% of the principal amount.
Step 4: Acquire Necessary Documents
Availing working capital loans requires businesses to produce an extensive list of documents. The table below shows the documents to be presented by applicants:Required Documents | Self-Proprietorship | Partnership | Public and Private Limited Companies |
Proprietor/Director(s) Aadhaar Card copy | Yes | Yes | Yes |
Proprietor(s) PAN Card copy | Yes | Yes | Yes |
Company PAN Card copy | No | No | Yes |
CMA report if business turnover is over Rs. 5 Crores | Yes | Yes | Yes |
Audit report and audited Financials for the last 2 years | Yes | Yes | Yes |
Last 3 years’ ITR and income statement | Yes | Yes | Yes |
Loan sanction letters and pertinent statements for the previous year (if any) | Yes | Yes | Yes |
Partnership Deed | No | Yes | No |
Certificate of Registration | No | No | Yes |
Names of current directories present on the company letterhead | No | No | Yes |
Bank statement of the last 12 months | No | No | Yes |
MoA and AOA | No | No | Yes |
Certificate of Incorporation | No | Yes | No |