Be it a start-up or an existing business; every company needs adequate liquidity to maintain business functions smoothly. So, maintaining an adequate working capital serves as the first requisite for individuals to fulfil their daily business needs effortlessly.
What is working capital? – Learn the details before proceeding.
Working capital is the measure of a business’s efficiency and its short-term financial status. It is calculated as the difference between the current assets and current liabilities. Just for a gist, Working Capital = Current Assets – Current Liabilities.
Current assets include the cash-in-hand plus upcoming receivables, and current liabilities are obligations including still-payable accounts and short-term debts.
So, working capital is one of the most significant financial figures to keep an eye on for every business owner. It’s useful for financers to gauge the financial health of any business. Even a currently profitable business heading towards a negative working capital will be considered as a negative entity.
Therefore, every business, especially the growing ones, needs to keep an eye on the working capital for funding growth. However, if a company doesn’t have adequate capital, they will hamper business operations. Avoiding such situations is obviously vital. Here are a few way-outs which can help:
Synchronize client-end payments
Keeping sufficient working capital can be a significant challenge at times. This depletion is potentially harmful to sustain a business and exploit new ventures. So, syncing payments from customers to ensure a continuous flow of cash is an obvious solution before one runs out of money mid-way.
Reduce overall expenses
Another way to increase working capital is by cutting down the overall expenses with suitable alternatives. For instance, one may limit the workforce and integrate technology for further optimisation.
This method can increase business profit, and also, cash flow if the sales remain constant.
Refinance the fixed assets
To improve the company’s operating cycle, entrepreneurs may also consider refinancing their fixed assets. For instance, they can raise fund for equipment.
So, by leveraging the existing assets, they can turn these into cash in times of short-term financial needs.
Analyse fixed and variable costs
Fixed costs are the expenses that stay the same irrespective of production output, whereas variable costs are the ones that keep varying with output and time.
Analysing fixed and variable costs respectively are essential in managing the total expenses incurred by any business.
Get working capital loans
Lastly, taking a working capital loan can give a company more cash on hand to meet the needs of the operating cycle. Even if a business runs smoothly, at times, there are lean periods when there is no cash to cover immediate expenditure.
Further benefits of such loans:
- From increasing workforce to expanding the business, a working capital loan can improve the long-term outcomes of a business.
- Secured loans require the debtors to pledge collateral. However, this loan eliminates putting up any collateral.
- One can avail a loan amount up to Rs. 30 Lakh to continue running the business without roadblocks.
- Debtors have the facility to repay the loan amount within a substantial tenure of 1 to 5 years.
- Moreover, leading NBFCs like Bajaj Finserv offer competitive working capital loan interest rate to its customers. It also gives pre-approved offers on working capital loans, business loans, home loans, personal loans including several other financial services and products.
This tailor-made scheme is a straightforward process, saving ample time for the borrowers. You can check out your pre-approved offer on its online portal by submitting a few essential details.
- Flexi Loan facility is another unique feature that comes with working capital loans. A debtor can withdraw money and repay anytime as per requirements. Here, a borrower has to pay interest only on the utilised sum without paying any additional charge.
With easy-to-qualify criteria such as a fixed age bar of the borrower (25-55 years) and 3 years of business vintage, working capital loans are easy to obtain. Moreover, borrowers don’t have to go through loads of paperwork and approvals. Providing KYC documents and a few other relevant ones is sufficient enough to avail this loan.
So, now that you know what is working capital and the importance of working capital loans, leverage your business successfully by considering this option. You can also get the loan amount disbursed within 24 hours with a few clicks.