WORKING CAPITAL FINANCE

What is Working Capital Finance?

The purpose of this loan is to finance everyday operations of a company. WC is used to meet current obligations like wages, utility bills & clear up account payables.

A working capital loan is not used to buy long term assets or investments.

Working Capital Principle

A company having a Working Capital account enjoys what is called a “Credit Facility” or a “Limit”. This “Limit” entitles the company to withdraw up to a certain amount in excess of the amount deposited in this account.

Types of Working Capital Limits

  • Cash Credit Facility
  • Overdraft Facility

The principle of WC remaining the same, in Cash Credit facility the primary charge is created on the stock & inventory (current assets) of the company. So CC is applicable in the case of Manufacturing & trading companies.

Overdraft (OD) Facility applies to service providers where stock & inventory is absent. Here the primary charge is created on book debts.

Purpose of Working Capital Limits

  • Financing the day to day operations of the company
  • Purchase of raw materials & fuel
  • Payment of wages
  • Payment of utility bills
  • Clear up account payable

Basic Product Features

How is the Working Capital Limit set?

The Credit Limit is derived after the bank assesses the WC requirement based on current financials, drawing power and future projections and subject to eligibility and sanction.

Interest Rate applicable:

Floating rate linked to the base rate & credit rating

Repayment Tenure:

Unlike the other loans which have a fixed repayment period, the Working Captial limit is fixed  for one year. Based on the performance of the company, the Limit is assessed at the end of every year, and if all evaluation criterias are satisfied, the Limit can be increased.

Margins:

The Margin of term loan varies between 10 to 25% depending on the credit rating of the borrower & the proposal.

Security

• Primary Security:

Hypothecation / pledge of the current assets like stock & inventory in case of CC and Book debts in case of OD.

• Collateral Security:

- Extension of charge over current assets, fixed assets, and other existing collateral if any.

- Personal guarantees of proprietor/partners/promoters.

 

Eligibility Criteria

some of the eligibility criteria are:

  • Satisfactory CIBIL report.
  • Satisfactory credit rating for the last three years
  • Latest Balance Sheet etc. should be available.
  • Satisfactory financial performance in terms of Sales/turnover and profits.
  • Evaluation of various ratios like Debt-equity ratio & DSCR etc
  • Satisfactory banking transactions.

Banks and Financial Institutions offering Working Capital Finance

We deal with the MNC, Private Sector, Nationalized & Co-operative Banks in India. We also facilitate lending from NBFCs.  We do not arrange for Private Finance.

Areas of Operation

Consultancy Fees

The professional consultancy fees applicable will be communicated by a “ Letter of Mandate” which will outline the terms & conditions. The work on the proposal starts once the “Letter of Mandate” is formally accepted by the client.

Loan Documentation Requirements

Click the links below to see the list of documentation for

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