Working capital loans are taken by business organisations of all shapes and sizes to fund their routine, day-to-day operations. These cash advances are ideally taken to cover costs such as employees' wages or payable accounts. Working capital loans are typically availed for by organisations that have extreme seasonal sale cycles and require funds during the dry months of the year in terms of revenue. They can be secured or unsecured in nature as well. These types of loans may be used for the following purposes:


  • Purchasing raw materials

  • Making advance payments to suppliers

  • Buying inventory

  • Funding accounts receivables if payments from debtors are delayed

  • Meeting overhead expenses such as salaries, utility bills, and rent

Features and Benefits of Working Capital Loan

If one needs to manage their company’s expenses that are immediate in nature, a working capital loan can come to save the day and bring a host of benefits that will work in the borrowers’ favour.

  • Unsecured loans: One can these days avail up to ₹75 Lakhs through a working capital loan that they need not pledge any asset as security for. However, the granted amount will depend on the bank.

  • Quick application and approval process: One of the benefits of such a loan is the convenient application and subsequent approval process. All one will need to do is submit a minimal set of documents and share basic information to begin their application process. Once the loan is approved, the borrower can expect the amount to be credited within a day.

  • No interference: Considering that working capital loans are repaid in a short span of time, the borrowers are not required to offer the lender any kind of expenditure-related information. All that the borrower has to concern themselves regarding is the EMI amounts and making those funds available before the due date monthly.

  • Flexible withdrawals: Some businesses do not maintain a budget or a formal financial plan, especially when it comes to matters such as the procurement of new material or management of overhead costs. This is when a working capital loan can come in handy as the borrower will have the flexibility to spend as per their discretion. In fact, some lenders only charge interest on the actual loan amount withdrawn. Additionally, one can also repay their dues when they have the necessary finances.

  • Pre-approved loan offers: Some banks and financial product aggregator websites, such as Finserv MARKETS, also give their borrowers the option of browsing through a host of pre-approved working capital loan offers. These offers make the application and approval process much easier. To grab the offers, the user may only be asked to submit their basic information on the relevant portal. If they are eligible for the loan, the approval and disbursal should be quick.

How Do Working Capital Loans Work?

At times, a company may fall short of the necessary finances for everyday expenses. This could translate to a sizable dip in business activity, catastrophic fluctuations in sales cycles or unstable cash flows, among others. In order to handle current liabilities and assets, a company may consider a loan of such a nature.

Now, there are different variants of this loan. They are:

  • Term loan

  • Post shipment finance

  • Bank guarantee

  • Letter of Credit (LC)

  • Cash credit/overdraft

  • Packing credit

  • Bill discounting

  • Line of credit

Depending on the needs of the business, a company can pick any type of working capital to meet its requirements.

Eligibility for Working Capital Loan

The criteria essentially depends on the lender. However, there are certain eligibility criteria requirements that are somewhat common for all. They are as follows:

  • Minimum age requirement: 25 years

  • Business vintage: At least 3 years

  • The latest Income Tax returns-related information

  • Business must not be a blacklisted entity

  • Location Requirements: The business should not be on a list of negative locations

  • Trusts, MSMEs and NGOs are not eligible

The borrower can possibly be asked to provide additional information for business verification purposes.

How to Apply for Working Capital Finance Loan

One can do so in two ways:

  1. Visit the official website of the lender, download the required forms and fill in the details and send the application to the address that has been given on the site.

  2. Visit the nearest bank branch, make a request for an application form and submit it with the documents.

Before applying for the business loan, one must ensure that they meet all of the eligibility requirements. In case of queries with regards to the functioning of working capital loans, one must get in touch with their lender for clarification-seeking purposes.

Documents Required for Working Capital Loan

As mentioned previously, the required documents for such a loan are kept to a minimum. Additionally, one must check the list that can be seen below in order to get an idea of what documents will come in handy.

  • Passport-size photographs

  • KYC documents

  • Relevant financial documents/statements

  • Proof of Business Operations and Vintage

  • Latest bank account statements going back at least 1 year

FAQs on Working Capital Loan

✔️What are the charges of availing a working capital loan?

At the most, a lender may charge the borrower a loan processing fee at the time of processing the loan. Most Indian lending institutions do not even charge foreclosure penalties to the borrowers. However, the interest amount for the month in which the borrower is foreclosing the loan may be applicable.

✔️How much working capital finance can one avail? On what basis is the quantum decided?

One can avail a loan of up to Rs. 75 Lakhs, for a maximum period of 5 years. The quantum of the maximum available loan amount is decided on the basis of the health of the business, revenues and relationship with the lending partners of Finserv MARKETS.

✔️What is the age limit for individual applicants?

The age limit for individual applicants is minimum 22 years of age at the time of loan application and under 65 years at the time of the end of the repayment tenure.