Working capital is a necessity when it comes to the day to day working of the company. Without sufficient funds, no company can function properly and efficiently. A working capital loan is aimed at increasing the available working capital. This loan cannot be used for savings or any long-term goal but rather has to be used to cover your immediate expenses and daily expenditures of the company or to just simply pay your employees or maintain your inventory or to cover the expenses for the big order you have landed.
For start-ups in India, a working capital loan can be a much-needed boost to meet the requirements to be able to go for the big orders and maintain the day to day operations. For start-ups, staying up floating for the early stages is the biggest challenge and working capital loan can greatly help out.
Here are 7 benefits of working capital loan every entrepreneur must know about.
1. Short-term advantage
These loans can help greatly in the short term periods to help boost the company productivity and efficiency by maintaining a stable cash reserve and cash flow to help start-ups fuel their early needs as they are very easy to secure.
2. No Collateral
For entrepreneurs or small companies with an excellent credit history and no default, a working capital loan can be available without collateral making it a very tempting opportunity.
3. Control over Cash
With working capital loan, one does not need to provide a record of every penny spent and instead can spend the money at his/her own discretion which anyway is going to be maintaining the daily operations of your business.
4. Control over company
Normally entrepreneurs look for investors to raise capital to maintain the daily operations of their businesses. Investors provide the required cash but in return of handing them over some shares of the company. By raising a working capital loan one retains the complete control of the company.
5. Need for Speed
Working capital loans are loosely regulated as in they have fewer restrictions and regulations to comply with meaning less paperwork. The loans are approved in the shortest possible amount of time without much hassle and are suitable for companies looking for fast capital generating venues.
6. Credit line
A working capital loan allows one to raise a line of credit where in one simply withdraws the amount one requires and have to pay interest on a monthly basis. This set up helps in covering up any extra expenses as they come and one does not have to be bound by a set amount.
7. Stability
The prerequisite of a successful company is stability of operations and to achieve that, a seamless cash flow has to be maintained. Without a good cash flow that helps in maintaining daily expenditures and unexpected expenses, there is nothing for the company to fall back on in case of an emergency and funds will have to be diverted or raised through means which may prove detrimental and disadvantageous for the business in the longer run. A working capital loan helps the company in maintaining this stability of cash flow and provides a financial strength to deal with unforeseen circumstances.
These benefits are more than enough to portray the advantages of raising a working capital loanthat will help one’s business to grow exponentially.