Are You Eligible for Working Capital Finance?

A working capital loan is a type of credit facility available to SMEs to help them manage their day-to-day operations and improve their cash flow. These are short-term loans that can be repaid within a year to fulfil urgent monetary needs. NBFCs like Oxyzo offer both secured and unsecured business loans for working capital needs.

A business may seek a working capital loan for a variety of reasons. The major goal is to address the company’s short-term financial difficulties. Many firms do not have a consistent income throughout the year, and as a result, they sometimes cannot satisfy their obligations. Profiting from investing opportunities is made possible by working capital financing in case of any financial constraints.

Parameters that make you eligible for Working Capital Finance

• Applicant Age: The borrower must be at least 21 years old when applying for the loan and 65 years old when the loan matures.
• Nature of the Business: The type of business determines whether it is eligible for capital financing. Manufacturers/OEMs infrastructure contractors or any other business owner of asset-backed companies who require consistent cash flows to sustain their working capital.
• Business Turnover: The quantity of business turnover varies depending on the lender.
• Another factor for obtaining a Working Capital Loan is the time that the company has been in operation. Your company should have been in operation for at least three years and your books should be profitable. However, this varies across various lending institutions.
• Financial History: Throughout the years of operation, your company should have a consistent and reliable financial history of earnings.
• Your business’s source of income is also a factor in whether you qualify for Working Capital financing. Every penny you earn for your business qualifies as an income source, whether it comes from your business or through investments.
• CIBIL Score: As a business owner, your CIBIL Score should be 700 or higher in order to acquire a Business Loan swiftly.
• Financial Capability: The ability of the firm to repay the loan is a significant criterion for eligibility for a Working Capital Loan. Your business’s financial efficiency, profit-and-loss statement, balance sheet, and any other income tax returns assess your ability to repay the loan and paint a picture of its stability and profitability.
• Creditworthiness: A key Working Capital Finance eligibility criterion is the creditworthiness of the company and its promoters.
• Ownership: Owning a property, such as residential or commercial, is an important condition for eligibility for a Working Capital Loan that lenders examine.
• Payment Terms with Suppliers: Your payment terms with your suppliers are taken into consideration while assessing the eligibility for the working capital finance.

Having additional cash on hand, whether your company is experiencing cash flow challenges, is always a good idea to protect yourself in the event of unforeseen occurrences. Working capital finance enables businesses to meet short-term or urgent cash flow needs.

It helps a company stay viable by covering payment gaps and meeting its working capital needs. Small and developing firms that rely entirely on accounts payables for operating cash can continue to operate without requirement for an equity transaction. Unsecured working capital financing is available to companies with strong credit ratings. In the event of default, they are not required to relinquish any collateralized assets. The capacity to get zero-collateralized funding improves the trustworthiness of the company.

If you don’t have the financial flow to make regular payments or your company has a spotty credit history, seeking a collateralized contract may be the best option.