Pune, 15th September 2022: Have you ever wondered why some startups fail before they even get off the ground and others stay afloat for years? The answer is that these businesses are able to acquire working capital and use it to their benefit.
Having access to cash is vital whether you plan to start, expand, or refinance your business. The key benefits of having working capital include better cash flow management and faster decision-making. Without adequate cash, you may struggle to pay your bills at critical times, thus, jeopardising your long-term goals.
Entrepreneurs and startups often do not have access to enough working capital because their primary sources of income are not always stable and predictable.
A Business Loan for working capital gives founders access to short-term cash flow, allowing them to meet their financial needs.
What is working capital?
Working capital is defined as the cash required for day-to-day operations. In simple terms, working capital is equal to current assets minus current liabilities. Current assets refer to items such as inventory, accounts receivable, etc., while current liabilities are things like debts owed to vendors and customers.
Why do founders need working capital?
Founders need working capital for various reasons, including purchasing raw materials, purchasing inventory, making payments to suppliers, paying salaries to employees, providing benefits to workers and contractors, and maintaining accounts payable and receivable.
1. Expansion and growth
Expansion and growth are the primary requirements for any company. A firm’s expansion should aim to increase its current size and expand into new markets and territories.
If the company lacks sufficient working cash, it may be unable to carry out these goals efficiently. However, having enough working capital will enable them to do so. Thus, working capital serves as a tool to facilitate expansion and growth.
2. Free up cash for emergencies
A company’s working capital can be used to cover short-term expenses. If a business experiences unforeseen circumstances and starts incurring higher expenses than expected, and if the company does not have any cash reserves, it might not be able to pay off these expenses and could go bankrupt.
To avoid this situation, companies must keep some money aside just in case something unexpected occurs.
3. Scale the team
Firms can scale their teams when they have sufficient working capital. Having enough working capital allows a company to give opportunities to individuals and expand their workforce.
4. Improves creditworthiness
Businesses might sometimes encounter difficulties due to a lack of sufficient working capital. These situations force them to delay payments, reduce prices and even delay payment terms, resulting in a loss of goodwill among customers.
To avoid these situations, companies must have sufficient working capital for their business.
How can Working Capital Finance help founders?
Working Capital Finance can help founders in the following ways: Working Capital Finance gives founders continual access to capital and helps them optimise cash flows while investing in thecompany’s growth.
- Working Capital Loans can assist in navigating an unforeseen crisis by giving adequate cushion to manage the expenditure to keep the organisation solvent.
- Working Capital Finance keeps a business solvent by covering payment gaps and meeting financial requirements.
- Unsecured Working Capital Finance is provided to companies with good credit ratings. In the case of a default, they are not required to surrender any collateralised assets.
- Enterprises typically seek Working Capital Finance to satisfy their urgent cash flow demand, and lending institutions can easily fulfil their demand.
With Poonawalla Fincorp, a reliable lender, borrowers can obtain a Business Loan for their working capital needs and get up to ₹30 Lakhs at attractive interest rates ranging from 18% to 28%, flexible repayment tenure and quick disbursal.
A Working Capital Loan helps businesses meet their short-term cash flow requirements.
When considering a working capital loan, borrowers must evaluate their business model and cash flow pattern. In addition to this, it is imperative to assess the loan repayment terms, interest rates, and the company’s ability to pay back the loan. These factors will help in understanding whether a Working Capital Loan is required or not.
Moreover, ensure you choose a reliable lender and pay the EMIs on time and in full. With Poonawalla Fincorp, a reliable lender, companies can use Working Capital Finance without providing collateral at the lowest interest rates with a 100% digital process.
Borrowers can also access their online EMI calculator to compute the EMIs and find the total cost of borrowing to make an informed decision.