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)
· Post shipment finance
· Term loan
· 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
The Yubi platform helps borrowers from multiple industries such as manufacturing, packaging and pharmaceutical raise working capital loans.
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:
| Bank | Loan Amount | Period | Rate of Interest | Processing Fee |
|---|---|---|---|---|
| HDFC | · Valuedraw – Rs. 10 lakh to Rs. 25 lakh · Elitedraw- Rs. 25 lakh onward | Depends on the Bank | Depends 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 Bank | Rs. 10 lakh to Rs. 2 crore | Depends on the Bank | Depends on the Bank | Depends on the Bank |
| Bandhan Bank | Depends on Bank’s assessment | Depends on the Bank | 10.06% 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
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.