{"id":7011,"date":"2021-03-15T05:34:11","date_gmt":"2021-03-15T05:34:11","guid":{"rendered":"https:\/\/kredx.com\/blog\/?p=7011"},"modified":"2023-10-26T05:51:43","modified_gmt":"2023-10-26T05:51:43","slug":"how-to-get-working-capital-loans-in-india","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/how-to-get-working-capital-loans-in-india\/","title":{"rendered":"How To Get Working Capital Loans In India?"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7011\" class=\"elementor elementor-7011\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-71434b42 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"71434b42\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-4b12edbb\" data-id=\"4b12edbb\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-347a2b3d elementor-widget elementor-widget-text-editor\" data-id=\"347a2b3d\" data-element_type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">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\u2019s day-to-day activities. Needless to say, enterprises must maintain a steady flow of working capital.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When faced with a shortage of adequate working capital, business owners can finance their operations through <\/span><a href=\"https:\/\/www.kredx.com\/blog\/how-are-working-capital-loans-for-msmes-and-smes-solving-cash-flow-issues\/\">working capital loans<\/a><span style=\"font-weight: 400;\">. This article elucidates the steps to avail a working capital loan in India.<\/span><\/p>\n<h2><b>Step 1: Select Your Preferred Type Of Loan<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Indian financing market offers a variety of <\/span><b>working capital loans<\/b><span style=\"font-weight: 400;\">. An individual can choose from the following types:<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Short-term Working Capital Loan<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">It allows businesses to finance their day-to-day operations. A company can manage its purchases, inventory, human resources, and overheads by availing a short-term working capital loan.<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Long-term Working Capital Loan<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Businesses can obtain long-term <\/span><b>working capital loans <\/b><span style=\"font-weight: 400;\">to maintain sufficient reserves in the long run or fund growth plans. These loans come with a longer repayment time, which lets a business adjust its borrowings with its long-term plans.<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Unsecured Working Capital Loan<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">An unsecured working capital loan does not require a borrower to pledge any asset as collateral or security to acquire funds. As a result, availing these loans is easier and quicker.&nbsp;<\/span><\/p>\n<h2><b>Step 2: Check Eligibility<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Such loans are largely offered to self-proprietorship, partnership and public, and private limited companies. Furthermore, the eligibility criteria for a working capital loan<\/span> <span style=\"font-weight: 400;\">differ across lending institutions. Highlighted below are a few basic requirements:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Applicant must be aged between 25-65 years<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A business vintage of at least 3 years (6 months in some cases)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A CIBIL score of over 700<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">No previous defaults with any financial institution<\/span><\/li>\n<\/ul>\n<h2><b>Step 3: Evaluate The Key Factors<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Before business owners apply for a working capital loan, it is imperative that they take into account some notable factors, such as:<\/span><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Rate Of Interest:<\/b><span style=\"font-weight: 400;\"> The interest rate for <\/span><b>working capital loans <\/b><span style=\"font-weight: 400;\">varies with every financial institution. It generally ranges from 12% to 16%, wherein long-term loans have lower interest rates than short-term loans.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Tenure Of Repayment:<\/b><span style=\"font-weight: 400;\"> The usual tenure of repayment remains 12 months for <a href=\"https:\/\/www.kredx.com\/short-term-business-loan\/\">short-term loans<\/a>. A long-term working capital loan can be paid off in a period of 3 years or longer.&nbsp;<\/span><\/li>\n<li aria-level=\"1\"><b>Processing Fee: <span style=\"font-weight: 400;\">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.&nbsp;<\/span><\/b><b>&nbsp;<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><b>Step 4: Acquire Necessary Documents<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Availing <\/span><b>working capital loans<\/b><span style=\"font-weight: 400;\"> requires businesses to produce an extensive list of documents. The table below shows the documents to be presented by applicants:<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Required Documents&nbsp;<\/b><\/td>\n<td><b>Self-Proprietorship<\/b><\/td>\n<td><b>Partnership<\/b><\/td>\n<td><b>Public and Private Limited Companies<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Proprietor\/Director(s) Aadhaar Card copy<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Proprietor(s) PAN Card copy<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Company PAN Card copy<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">CMA report if business turnover is over Rs. 5 Crores<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Audit report and audited Financials for the last 2 years<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Last 3 years\u2019 <a href=\"https:\/\/incometaxindia.gov.in\/Pages\/default.aspx\" target=\"_blank\" rel=\"noopener\">ITR and income statement&nbsp;<\/a><\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Loan sanction letters and pertinent statements for the previous year (if any)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Partnership Deed<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Certificate of Registration<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Names of current directories present on the company letterhead<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Bank statement of the last 12 months<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\"> MoA and AOA<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Certificate of Incorporation<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><b>Step 5: Apply For The Loan<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Borrowers can apply for a working capital loan offline by visiting the nearest branch of their lending partner. Or, they can apply for the same digitally by visiting the lending institution\u2019s official website, submitting required documents. The loan amount is disbursed as soon as one\u2019s application is evaluated and approved.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, <\/span><b>working capital loans<\/b><span style=\"font-weight: 400;\"> come with a longer processing time due to extensive documentation. Additionally, stringent eligibility criteria exclude a portion of business owners from availing these loans.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, individuals can opt for other sources of financing to meet their working capital requirements, such as&nbsp;<a href=\"https:\/\/www.kredx.com\/working-capital\/invoice-discounting\">invoice discounting<\/a>. Here, a company sends details of its invoices to a financier, who in turn extends the amount shown at a discounted rate. It offers quick funds against a business\u2019s unpaid invoices, enabling enterprises to fulfil their working capital requirements with ease.<\/span><\/p>\n<h2><b>Bottom Line<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Every organisation requires sufficient working capital to conduct its day-to-day operations. Thus, working capital acts as an indicator of a company\u2019s financial position, the lack of which poses a threat to its efficiency. When faced with a shortage of funds, businesses can opt for <\/span><b>working capital loans<\/b><span style=\"font-weight: 400;\"> and stabilise their financial standing.&nbsp;<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>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\u2019s day-to-day activities. Needless to say, enterprises must maintain a steady flow of working capital.&nbsp; When faced with a shortage of adequate working capital, business [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":7012,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[127],"tags":[37,58,1108,38,227],"class_list":["post-7011","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-working-capital-business","tag-invoice-discounting","tag-loans","tag-long-term-loans","tag-working-capital","tag-working-capital-loan","post_format-post-format-video"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7011","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/comments?post=7011"}],"version-history":[{"count":10,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7011\/revisions"}],"predecessor-version":[{"id":15907,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7011\/revisions\/15907"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/7012"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=7011"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=7011"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=7011"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}