Working capital, essential to daily operations, evaluates a company’s ability to meet its needs. Working capital shortages can make it challenging to finance day-to-day operations.
A lack of appropriate working capital might make attracting investors difficult for any business, particularly a small business. Moreover, a lack of working capital can make it impossible for a company to secure the resources it requires to grow.
A Working Capital Loan is a solution that assists businesses in growing and expanding. In other words, it is a type of loan provided to companies that enables them to manage their day-to-day operations, purchase raw materials, labour, electricity bill payment, payroll, etc.
So when looking for Working Capital Loan, it is essential to select the right working capital partner.
How to select a reliable working capital financing partner?
To select a reliable partner for working capital finance or loan, follow the below tips:
1. Find out whether it is collateral free or not
The first step in choosing the best working capital finance is determining whether or not the loan option is collateral-free.
There are many types of Working Capital Loans; borrowers need to select the one that meets their needs.
Usually, Working Capital Loans have no collateral requirements because they help fulfil short-term liabilities or day-to-day operations. Obtaining a loan is quick and easy for most businesses with good credit.
With renowned financial institutions and NBFCs, entrepreneurs can avail of Working Capital Loan without providing security at the lowest interest rates through the online process.
2. Compare eligibility criteria
Before companies opt for Working Capital Loan, they should check whether they are eligible for a loan with their preferred lender.
Each lender’s eligibility criteria differ, and companies may not wish to be refused because of certain conditions.
Borrowers must choose a lender whose parameters match their profile to discover the best offer on a Working Capital Loan.
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3. Compute the total cost of borrowing
For those looking for a Business Loan in Chennai, it is essential to consider the cost of borrowing. This includes the amount borrowed, the interest rate, fees, and other charges.
Since there is a greater chance of default without collateral, the cost of borrowing is always higher for unsecured Working Capital Loans than for secure options.
Before deciding on the loan type, compute the cost of borrowing. Consider how much interest you will have to pay throughout the life of the loan. Remember that the higher the interest rate on loan, the less likely the company will be able to repay the loan early.
With the EMI calculator offered by leading financial institutions on their websites for free, companies can compute the EMIs and find the total cost of borrowing, thus making an informed decision.
4. Look out for loan processing and disbursement time
When considering a working capital partner, check the loan processing and disbursement time, as it will help fulfil needs quickly.
Businesses with good credit scores can get Working Capital Loans quickly.
Working capital finances are popular financing choices because of their quick approval and processing times. Lenders recognise the importance of a cash crunch in a business and the need to quickly repair the gap to provide enterprises with the opportunity to continue operations without lag.
With NBFCs like Poonawalla Fincorp, entrepreneurs can get an instant Business Loan in Chennai online. They ensure a hassle-free experience whenever one requires finances for their business and make every effort to minimise delays.
5. Examine the repayment period
The final stage in determining the best Working Capital Loan partner is to weigh repayment choices and tenure flexibility.
The repayment period will vary depending on the lender. Thus, companies need to examine the requirement and then select a lender.
A company must select a financing option and a lender that provide flexibility and services such as loan foreclosure at any moment without additional fees, among other things.
Top financial institutions offer a flexible tenure of up to 36 months, which gives companies enough time for repayment.
Whether a company is experiencing cash flow problems or not, keeping extra cash on hand is always a wise approach to protect it from an emergency.
A Working Capital Loan can help businesses balance their cash flow and keep a steady source of funds on hand in an emergency. Surplus capital also serves as an unforeseen liquidity buffer for the companies.
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