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Working Capital Loan

3 mins read

Published: 22 May 2024

Updated: 22 May 2024

A Working Capital Loan is a short-term loan that you can use to cover expenses, manage cash flow, or make capital improvements to your business. A Working Capital Loan for small businesses is meant to help you pay for a few things like inventory, materials, or payroll, which are all things you need to run your business daily.

Working capital is the backbone of any kind of business, whether it is big or small. A working capital bank loan is a loan that is taken to cover the financial needs of a company's everyday operations. These loans are not taken to buy long-term assets or investments and are instead used to give the working capital that covers a company's day-to-day short-term operational needs.

My Mudra provides Working Capital loans quickly to big and small enterprises to ensure that their functioning is quick, smooth, and easy.

Pros and Cons of Working Capital Loans

PROS: The instant benefit of a working capital bank loan is that it's easy to obtain and allows business owners to efficiently cover any gaps in working capital expenditures. The other remarkable benefit is that it is a form of debt financing and does not need an equity transaction, meaning that a business owner has full control of their company, even if the financing need is urgent. Some of these loans are unsecured. In such a case, a company is not required to give any collateral or asset as security to secure your loan. However, only companies or business owners with a high credit history are eligible for an unsecured loan. Businesses with low credit history have to choose from secured loans.

CONS: A secured working capital loan that needs asset collateral can be a limitation of the loan process. Interest rates on loans are comparatively high in order to compensate the lenders for repayment risk. Furthermore, working capital bank loans are often linked to a business owner's personal credit history, and any of the missed payments or defaults may adversely affect their credit score.

What Is Working Capital Management?

Working capital management basically focuses on the use of a company's resources more efficiently by examining and enhancing the use of current assets and liabilities as well. The main aim is to maintain enough cash flow to meet its short-term operating costs and short-term debt obligations, along with maximizing its profitability. Working capital management plays a vital role in the cash conversion cycle, or the amount of time an organization uses to convert working capital into cash.

Features of Working Capital Loan

Below are the features of a working capital loan:

  • Competitive Interest Rates
  • Overdraft Facility
  • No Collateral is Required (in the case of an unsecured loan)
  • Pre-approved Offers

Eligibility for Working Capital Loan

The eligibility criteria for a working capital loan are the same as any other loan. Below are the eligibility criteria for a working capital loan:

1. Age:

The applicant/borrower should be at least 25 years old.

2. Business Vintage:

The business must be running for at least three years.

3. Business Turnover:

The business should have a turnover of a minimum of 7.5 crore and above.

4. CIBIL Score:

The CIBIL score should be 750 and above.

5. Business Nature:

Individuals, proprietors, partnership firms, private or even public companies, retailers, traders, or any other business owner engaged in the business of service, manufacturing products, or trading sectors that require constant cash flows to maintain their business's working capital.

How to Apply for a Working Capital Loan through My Mudra?

Here are the steps to apply for a working capital loan:

1. Select ‘Business Loan’ on our home page

2. Click on ‘Apply Now’.

3. Enter your phone number.

4. Submit the details along with the OTP you’ll receive on your registered mobile number.

5. You’ll get a call from our representative for proceedings.


Our Working Capital Loan is the best alternative to traditional bank financing. If you’re looking for a corporate financing loan with low interest rates, quick approvals, and flexible repayment schedules, you are at the right place! Apply for a Working Capital Loan up to Rs. 50 Lakhs online and manage your business expenses easily.

Also read: Get Online Business Loan up to ₹2 Crore

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