What is Working Capital Loan?

A working capital loan is one which is taken to quench the financial thirst of day-to-activities in the office. An established business or a small shop has daily expenses which sometimes become a financial burden on the shoulders. Especially when the business is cyclic or seasonal, managing such expenses is burdensome. The working capital loan is the one-stop solution for all the financial stress of managing the expenditure.

The working capital loan can either be secured or unsecured, in the former the company’s asset shall be presented as the collateral. On the other hand, the unsecured working capital loan is the signature loan that is granted by the bank based on the applicant’s eligibility criteria and CIBIL Score. Hence, it is important to boost your CIBIL score if you are thinking of taking a working capital-secured or unsecured loan. Besides these two options, the applicant can apply for the demand loan which means that the lender is allowed to repay the full amount at any time during the tenure. The borrower can also ask for an overdraft facility for the working capital loan. It is advisable to check all the available options and opt for the best as per the requirement.

The applicant can avail of the My Mudra working capital loan with three easy steps. We are providing a paperless process for the disbursal of loans. Apply online with just a click and get your documentation and enjoy the quick disbursal of a working capital loan. My Mudra is offering different types of working capital loans, and the interest rate of the same starts from 10%p.a to 19% p.a.

Types of Working Capital Loan

The working capital loan for businesses has various types. The applicant should opt for the best among all the working capital loan types as per the requirements.

1. Unsecured Working Capital Loan

The unsecured working capital loan allows the borrower to take a loan up to Rs.50 lakh from the bank. An unsecured loan means that the loan is granted based on the eligibility criteria of the borrower. There is no collateral required for the loan, it can be disbursed based on the eligibility criteria and the CIBIL Score.

2. Secured Working Capital

The secured loan on working capital is the one in which the borrower must keep the assets as collateral. The secured loan offers more security and also has a lower rate of interest as compared to the unsecured loan for working capital.

3. Overdraft Facility for Working Capital Loan

This is also available for the working capital loan, the borrower can withdraw funds from a fixed line of credit. The repayment of the OD working capital loan is also hassle-free.

Where to use a Working Capital Loan?

Many people are opting for the working capital loan for business and working capital loan for small businesses, this will ensure the smooth working of the business. The loan applied for the working capital can be utilized in various tasks mentioned below:

• Payroll: Manage Payroll with working capital loan swiftly.
• Rent: Rent can be easily managed through the working capital loan.
• Operational Costs: Operational costs can be a cakewalk with the working capital loan.
• Cash Flow: Managing cash flow gaps is not a strenuous task with the working capital loan.
• Day to Day Expenses: These expenses can be managed with the help of a working capital loan.
• Debt: Paying old debt taken for business is easier with the working capital loan.

Know the Working Capital Loan Eligibility

To get a working capital loan, you need to meet certain criteria set by lenders. This ensures that you are capable of managing and repaying the loan. Here’s what you need to know:

1. Age

• You must be at least 21 years old to apply for the loan.
• You should not be older than 65 years when the loan matures.

2. Type of Business

Your business type affects eligibility. This includes individuals, proprietors, partnership firms, companies, retailers, traders, or any business owner in service, manufacturing, or trading that needs regular cash flow.

3. Business Turnover

The required turnover amount depends on the lender. For example, HDFC Bank has different criteria for annual turnovers below and above Rs. 7.5 crore.

4. Business Age

Your business should have been running for at least 2 years and should be profitable. Requirements may vary between banks.

5. Business Experience

You should have at least 2 years of experience in the same business at the current location.

6. Financial History

Your business should have a stable, profitable financial history.

7. Income Source

All earnings from your business, including business income or investment income, count as your income source.

8. Credit Score

For a company, the business CIBIL score should be 700 or above. For sole proprietors or self-employed professionals, your personal CIBIL score should be 700 or above.

9. Financial Capability

Your business's financial health, including profit and loss statements, balance sheets, and income tax returns, shows your ability to repay the loan.

10. Creditworthiness

Neither you nor your business should have any past loan defaults.

11. Ownership or Collateral

Banks consider property ownership, such as a house, office, shop, or warehouse, as collateral.

These criteria help ensure that you and your business are qualified and capable of managing a working capital loan responsibly.

Documents Required for Working Capital Loan

• PAN card of the Company
• KYC Documents
• Address Proof
• Ownership Proof of property whether it be private or commercial
• Bank statements, Income Tax Returns, and Sales Tax Challans for the previous three years.
• Registration Proof includes, partnership deed, Certificate of Incorporation
• Loan details of an existing loan. (if any loan is pending)
• Photograph of the applicant and the co-applicants

Documents Required for Self-Employed Individuals & Sole Proprietorship for the My Mudra Working Capital Loan

• ITR for at least 2 years
• Balanced sheet
• The last six months' bank statement of the individual who is taking the loan.
• Bank statements for the last three months which are mentioned in the balance sheet of the business.

Documents for Partnership Firm and Pvt Ltd Companies for the My Mudra Working Capital Loan

• Audited financial statement
• ITR of the last two years
• Bank statement for the last six months
• Partnership deed
• Partnership Authority
• Shareholding Patterns of the company
• Memorandum of association of the Pvt Ltd Company
• Board Resolution of the company
• Articles of Association of the Pvt Ltd Company
• Incorporation Certificate of the company

Documents Required for Non-Professionals for the My Mudra Working Capital Loan

• Sole proprietorship business identity proof
• KYC documents
• Income Tax Documents
• Sales Tax Returns for the company
• Last six months' bank statement

Know the Working Capital Loan Interest Rate

Interest rate on the working capital loan differs from bank to bank. The borrower should be well aware of the interest rates and opt for the lowest interest rate working capital loan.

How to Apply for the Working Capital Loan?

Apply for the working capital loan hassle-free with My Mudra. We are offering a swift loan approval process. Get your working capital loan disbursed within a day with the three easy steps mentioned below.

• Apply for the working capital loan with a click.
• Get the documentation done online.
• Enjoy quick disbursal of your working capital loan.

Conclusion

Working capital loan means taking a loan to meet daily requirements of the office. The working capital loan from My Mudra will be beneficial for you as we are providing quick disbursal with minimal documentation to quench the financial thirst of your business.  Get the working capital loan at an attractive interest rate within a day. It is always advisable to check monthly EMIs from a working capital loan interest rate calculator. A loan is the planned decision and not a burden if taken wisely.

Also Read:
- Difference Between Fixed Capital and Working Capital
- Types of Working Capital Loan: Which One Does Your Business Need?