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ABOUT Working Capital Loan

This is the type of loan whose purpose is to finance everyday operations of an establishment. A working capital loan is not used to buy long term assets or investments but is required for day-to-day working capital requirements of the company.

In cases where companies fail to generate the  revenue  needed for day-to-day business expenses it may apply for a working capital loan. The limit of the amount that can be withdrawn is sanctioned by the bank based on the business cycle of the client, the gap in working capital and the drawing power of the client. This drawing power is determined, based on the stock and book debts statements submitted by the borrower at monthly intervals against the security by hypothecating business stock of goods andbook debts.


Any individual or any sovereign entity is eligible for taking a working capital loan

Required Documents

The documents needed vary from case to case. Let Finmart understand your needs and assist you in documents requirement.



This loan can be either unsecured or secured. The working capital funds can be availed in two forms which is available in both Indian as well as Foreign Currency:

Funded Facilities
Cash credit, Bank overdraft, short-term loans, Bill discounting etc. are some of its types

Non-Funded Facilities
Buyer's credit, letter of credit, Bank guarantee is some of its types.

Working Capital Cycle can be explained as below:

Cash > Raw Material > Work in Process > Finished Goods > Receivables > Cash

Unlike most other business loans that allow companies to acquire capital for expansion, a working capital loan helps in smooth functioning of the business and boosts the cash flow of the unit. In this way, companies can “buy time" to find ways of generating the necessary revenues based on their existing capital and human resources. Working Capital Loans are quick sources of cash. It can help your business tide over cyclical downturns. They can be used to provide cash flow during short-term shocks.

Funded facilities provide actual monetary assistance to purchase business assets or to meet business expenses.

Non Funded facilities provides guarantee on behalf of customer to the supplier of materials for the procurement of goods and services on credit.

•  It is a type of funded facility.

•  Businesses can draw funds beyond the available limit of the main operating bank account. The maximum amount overdrawn is the line of credit extended.

•  Pay only for the interest on the amount actually utilized.

•  The terms and the amount withdrawn depend on the relation with the bank and business's credit worthiness.

•  In order to repay and close the account, simply deposit the outstanding dues into the account.

•  Suitable for all business.


•  It is a type of funded facility.

•  A short term loan comes with a fixed interest rate and payment period - usually 12 months .

•  This particular credit facility is usually secured, but in case of a good working relationship with the lender and a good credit history, one might get a short-term debt depending on the financial strength.

•  Suitable for all business.

•  It is a type of Non Funded facility.

•  As an importer one can make the import payment to its overseas supplier by availing the buyer's credit and can repay the lender at a later date.

•  The funding is arranged from the overseas network branches and one can avail of this product in major currencies.

•  Buyer's credit norms vary as per bank's internal process and policy requirements.

•  It is a type of Non Funded facility.

•  A L/C is a Banker's undertaking on behalf of a constituent to pay to a third party against compliance of stipulated conditions.

•  This involves irrevocable sight and usance L/Cs, back to back L/Cs, Standby L/Cs & Inland & Foreign L/Cs.

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