🔑 Key Features of a Working Capital Loan
| Feature | Description |
|---|---|
| Purpose | To meet short-term business needs (not for capital expenditure) |
| Loan Tenure | Usually 3 months to 1 year (renewable or revolving) |
| Repayment | Lump sum or periodic payments |
| Security | Can be secured or unsecured depending on loan amount and profile |
| Interest Type | Mostly floating, charged only on amount used (in some cases) |
| Speed | Fast disbursal, minimal documentation for small businesses |
📦 Common Uses
Buying raw materials
Paying suppliers
Clearing pending wages/salaries
Managing delayed customer payments (receivables)
Covering business during off-seasons
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🏦 Types of Working Capital Loans
| Type | Description |
|---|---|
| Cash Credit | Overdraft facility against stock/inventory or receivables |
| Overdraft Facility | Linked to business current account—interest only on used amount |
| Short-Term Loan | Fixed loan amount with fixed repayment tenure |
| Trade Credit | Supplier extends delayed payment option |
| Invoice Discounting | Get money upfront against unpaid invoices |
| Letter of Credit/Bank Guarantee | Used for import/export businesses |
✅ Advantages
Keeps business operations running smoothly
Improves short-term liquidity
Fast and flexible borrowing options
No need to liquidate assets or equity