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Working Capital Financing & its Benefits

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Terkar Capital
Working Capital Financing & its Benefits

When a business needs money to cover expenses such as day-to-day operations, Purchase of raw material, wages, electricity bill payment, payroll, etc., rather than the purchase of equipment or machinery, such financing is known as Working capital financing. This is a very common type of financing for the business which does not have a consistent cash flow and also for the companies that are in a growing stage and are taking up larger projects than usual.

Generally working capital comes into the picture whenever there is a gap between debtors and creditors cycle. For e.g.  You’re the manufacturer of the X component which is used for 2 wheeler assembly. In order to manufacture this X component you need to purchase the raw material, and probably you need to pay upfront to purchase the raw material. However, the conversion of that raw material to cash may take the time of 45 days. In this case, you need the working capital to bridge the gap between the purchase of raw material and the sale of the finished products.  

It is a simple solution business that helps in keeping up with the work cycle. Working Capital is the difference between the company’s current assets and its current liability. It is one of the very flexible options to opt for as it proceeds with minimum documents and in a short span of time. One can opt for working capital finance in both secured and unsecured ways depending upon the availability of collateral.

 

Cycle for working capital finance


Working Capital Cycle refers to the time period required to convert the net assets and liabilities into cash. Working capital cycle always shall be short, more easy it is for companies to free their blocked cash. If the turnaround time of conversion into cash is higher, the requirement of working capital will be higher.



Types of Working capital Financing


There are various types of working capital loans available from which a business can select as per their requirement. Most of the banks offer similar types of Working Capital Loans. These are: 


  1. Overdraft Facility or Cash Credit
  2. Bank Guarantee
  3. Bill Discounting
  4. Letter of Credit
  5. Invoice Factoring

 

 

Benefits of Working Capital Financing

 


  1. Working Capital financing can help businesses to boost their day-to-day activities and meet the short-term requirement of the business.
  2. The businesses can eliminate the collateral and opt for an unsecured working capital loan as it is not always justified to put your assets at risk. This will eliminate the requirement of collateral and the business will be able to flourish in the operations.
  3. The procedure of getting a working capital loan is very flexible and you can easily apply at Terkar Capital to get the best solutions on the funding. As a result, the process will get easier and funds will be disbursed faster.
  4. Working capital finance helps you to maintain a good cash flow of the business which in turn results in strengthening the financials and gaining stability in the business whenever there is an unexpected requirement.
  5. Working capital financing offers a very flexible and easy repayment option. It also fulfills cash requirements in an emergency period. So working capital finance gives much-needed leverage to the business to take up the risks.

 

 

Why Terkar Capital?

Working capital is one of our services where we have expertise. At Terkar Capital we offer a wide range of services to clients. We will always be ready to serve you with all your requirements in the best possible ways. Terkar Capital has expertise in market strategies that provide the working capital facilities at ease. So whenever it is funding, Terkar Capital is ready to serve you at best!



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