Working Capital Loan

Working capital is categorized as the money that businesses use regularly. It is the capital that business owners use for everyday operational activity.

However, it is vital to note that working capital is not deployed for business expansions. Instead, it is raised exclusively to conduct regular business operations that include management of human resources and accounts payable expenses.

A lack of working capital finance often disrupts seamless day-to-day business operations. It stalls business processes, eventually hindering productivity. Hence, taking a working capital loan is imperative to boost business operations and stimulate productivity.

Get Access to a range of Working Capital Loan


What is a Working Capital Loan?

A working capital loan is classified as a specific business loan that is availed to fund the short-term operational requirements of a business.

A deficiency in working capital leads gives rise to adverse impacts on productivity. Due to this, businesses seek a loan amount to address different aspects of productions like:

· Buying of raw materials

· Essential service maintenance expenses

· Payment of wages

· Logistics and rent expenses

Note: Capital finance is primarily relevant to small and mid-sized businesses, where the loan tenure ranges between 6-48 months.

How Does a Working Capital Loan Work?

Often, small businesses find it difficult to manage everyday expenses due to inadequate cash flow. The reasons can be a decline in business activity, an unsteady flow of funds, and sales cycles. A business owner may seek a business loan to overcome this obstacle.

A working capital loan has several variants that include:

· Bank guarantee

· Letter of Credit (LC)

· Cash credit/overdraft

· Post shipment finance

· Term loan

· Bill discounting

· Line of credit

· Packing credit

Based on the business requirement, a business owner can elect any of the above mentioned variants to meet the requirements.

Top Features of a Yubi Working Capital Loan

According to market experts, post-2017, the relative usage of working capital worldwide has amplified by 9.4%. The primary contributing factor to this increase is the extensive features of working capital loans.

Here is a brief overview of the exclusive features of Yubi’s working capital loan that is at par with the international standards:

1. Loan amount:

It is customised as per the requirement of the business, its expertise, and financial necessities.

2. Interest Rate:

Differs from one lender to another

3. Repayment:

The repayment schedule is planned to be in sync with the cash flow of the business

4. Easy Loans

The eligibility criteria are pretty straightforward and are sanctioned within 24 hours

5. Loan Tenure

The loan tenure varies from 6-24 months

6. Collateral

Such capital finance from Yubi is either secured or unsecured loans

7. Processing Fee

A processing fee is charged against the working capital loan authorized

8. Trouble-free Prepayments and Withdrawals

Easy withdrawal of the needed capital loan as required. No prepayment charges are needed.

Benefits of Working Capital Loan by Yubi

Around 40% of businesses find it challenging to pay for operating expenses due to their organizational silos, complex targets, and complex systems.

Yubi deploys working capital finance for small businesses with sustainable eligibility criteria and relatively less documentation while adhering to transparency. The key aim of Yubi is to provide easy capital finance to help businesses at low interest rates to drive optimal performance.

Yubi deploys working capital loan that highlights quantitative benefits like:

1. Accelerated Processing

Business owners can claim a working capital loan within 3 days after submitting the required documents.

2. Retaining Ownership

Yubi’s working capital finance helps to avert equity divestment by deploying seamless access to credit minus any collateral.

3. Streamline Business Cash flow

Loans from Yubi aids small businesses to sustain usually during sales cycle disruptions and cash decline by meeting the necessities.

4. Enhance Credit Score

Yubi helps revamp a low credit score by notifying the relevant Credit Bureau of the loan update.

Along with the ones mentioned above, a business loan from Yubi boasts of a host of other salient benefits, including:

· Swift online application

· Minimum documentation

· Easy eligibility criteria

· Zero hidden charges

· Flexible repayment tenure

· Reasonable interest rates

· Low processing fees

· No foreclosure charges

· Doorstep services

Banks Offering Working Capital Loans

Several esteemed Banks (both public and private) in India meet the business loan requirements of their clients.

Here is a brief overview of the prime Banks and Non-Banking financial corporations that deploy business loans to their customers:

BankLoan AmountPeriodRate of InterestProcessing Fee
HDFC· Valuedraw – Rs. 10 lakh to Rs. 25 lakh

· Elitedraw- Rs. 25 lakh onward
Depends on the BankDepends on the Bank· Rs. 7500 or up to 1% of the loan amount, whichever is lesser

· As Administrative cost, Rs. 5000 along with tax will be charged as a non-refundable amount as legal expenses
Indian Overseas BankRs. 10 lakh to Rs. 2 croreDepends on the BankDepends on the BankDepends on the Bank
Bandhan BankDepends on Bank’s assessmentDepends on the Bank10.06% p.a. to 16.64% p.a.At least 1% of the service tax that can be applied

Note: Certain Banks, like RBL, Bank of Baroda, etc., provide business loans to relevant clients. However, getting in touch with the particular Bank is always recommended directly for more details.

What are the Eligibility Criteria for Business Capital Loans?

In tune with the evolving business models and disruption, the eligibility criteria of businesses for business loans differ from one lender to another.

However, there are some fundamental requirements to be qualified for working capital finance, such as:

· The current IT returns details

· Minimum age requirement of 25 years

· The business location should be feasible and promising

· Business of a minimum of 3 years

· Blacklisted businesses are not allowed

Documents Required to Apply for Working Capital Loan

The working capital loan industry has seen humungous growth. From 2017 to 2022, the working capital loan market has grown from a Million USD to a Multimillion USD industry.

To avail of such capital finance, there is a mandatory documentation process. Below is the list of all the required documents business owners need to present to authorise a working capital loan:

· KYC documents such as Aadhar Card, Driving License, Passport, Utility Bills, Voter Card, and PAN Card

· Registration and incorporation certificate

· Correctly filled application form along with photographs (passport-size)

· Partnership deed, if relevant

· Financial documents such as IT Returns, Bank Statements, etc.

· Any other required documents needed by the lender

How to Apply for our Working Capital Loan?

To apply for Yubi’s working capital loan online from home or office, an applicant needs to follow a set of simple steps as given below:

Step 1: Navigate to Yubi’s website.

Step 2: Check the eligibility for the working capital loan

Step 3: Duly fill up the application form

Step 4: Submit the requested documents

Step 5: Receive the loan amount after proper verification

Conclusion

More than 28% of businesses globally have been accessing Banks to fund their working capital requirements.

For instance, many research studies confirm that in India, between March – April 2020, twice the number of working capital loans got sanctioned. In East-Asia Pacific, the number of firms that access working capital loans scaled up to 26%.

Hence, a comprehensive understanding of working capital loans and their features is imperative to meet the business’s operational requirements. Not to mention, harnessing the power of working capital loans helps businesses to uphold a cash reserve, handle sales fluctuations, and leverage trade prospects.

FAQs

Working capital loans are considered a type of debt financing. It is used to meet short-term financial requirements like capital expenditures. Hence, it is vital for business and its growth prospects.

The working capital loan’s interest rate of Yubi is dependent on the requirement of the borrower

The process of application is online. You need to go to Yubi’s website, check the eligibility, complete the application form, submit the documents, and then wait for the approval.

All our working capital loans are unsecured and do not need security.

Here is the list of the companies that are eligible for a working capital loan:

·Business Owners

·Public and Pvt. Ltd. companies

·Individuals

·Partnership firms

·Proprietors

·MSMEs

Note: The industry and sector play a significant role in authorising business loans. It is always suggested to check the list of requirements to avoid any application rejection.

No. A few banks need an asset as a security to authorise a working capital loan. For example, a few banks acknowledge commercial, residential, and industrial properties as collateral. In some cases, stocks, book debts, shares, and gold are submitted.

The processing fee that Yubi charges range between 2-3% of the given loan amount.