- KredX Editorial Team
- 13 Oct 20
- Working Capital

There’s a reason why working capital is widely regarded as the indicator of a company’s success. At the risk of stating the obvious, every company, small and large, needs adequate working capital to survive and scale.
Several small businesses have shut down, and large companies have fallen out of competition due to lack of sufficient short-term funds. All those long-term objectives of expansion and growth to dizzying heights seldom bear fruit if a company’s cash inflows and outflows are out of balance.
Apart from fuelling daily operations, working capital is a necessary component in facilitating the growth of a business. And as your company gaits toward expansion, additional funds become a necessity; but where will that influx come from? That’s where a working capital loan steps in.
With a working capital loan in place, you can offset any cash crunch that accompanies expansion and paves a smooth path to grow your business.
What Is The Difference Between A Traditional Loan And Working Capital Loan?
You might wonder how a working capital loan is any different from a simple business term loan. To set aside your confusion, here are a few pointers in the following table that demonstrates the distinction.Parameters |
Working Capital Loan |
Business Term Loan |
Amount | The amount is tailored to a company’s individual needs, and, therefore varies. | Financial institutions usually set a fixed range for the loan amount in this case. |
Tenure | It is a short-term credit facility with tenure ranging up to 4 months. | It is a mid-term loan with repayment term in the range of 1 – 5 years. |
Purpose | Businesses avail a working capital loan to address short-term cash shortages or finance operations. | It’s borrowed to meet high-end expenditures like buying new machinery, purchasing land, etc. |
Eligibility | It’s usually less stringent and, thus, easier to avail. | Term loans involve stricter criteria and extended processes. |
How Is A Working Capital Loan The Best Thing For Your Business?
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Strike Balance In Cash Flow
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Deft Handling Of Liabilities
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Timely Management Of Emergencies
What Are The Different Types Of Working Capital Loans?
Through this financing facility, you can discount the bills issued against credit sales in your business, and receive a cash advance against their value. This way, you can release funds tied up in unpaid but approved bills and streamline your cash flow.-
Bill Factoring
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Business loan