The Pros and Cons of Working Capital Loan

Do you have a business that you always want to keep afloat and operative without issues? If yes, you will need a large sum of money to arrange working capitals or the cash flow. Sometimes, you may not have enough money to manage the working capital. 

But that does not mean that your business should suffer and stop operations.It is because you can always apply for the working capital loan from leading lenders in India. The availability of the working capital loan is one of the best sources of working capital finance. As per your eligibility and terms and conditions of the lenders, you can get an amount of up to Rs.45 lakh. 

Considering the sources of working capital finance, you don’t have to rely on liquidating your assets and savings. The working capital loan can help you do that. However, applying for the working capital loan may have its own pros and cons. 

 unearth the perks and cons of the working capital loan in this post!

What is a working capital loan?

The working capital loan is a short-term loan used only for the working capital needs of the firm. The money out of this loan covers the operating costs of your organization, and when new owners are finding it tough to manage cash at hand. 

To manage costs such as rental charges to paying employees to utility bills, the working capital loan can be used. If you want to give a push to your firm when you are facing a cash crunch, you can also use the working capital loan amount to manage all. 

What benefits the working capital loan offer?

1.They are mostly short-term loans

The working capital loans are usually as short-term loans. They are designed by known lenders in India to help you meet your immediate business financing needs. This way, a business owner can get back on the feet within weeks/months within availing the loan. 

2.They are faster and less cumbersome 

Leading lenders are aware that you are applying for the working capital loan for instant needs. Hence, they don’t take much time to sanction your loan request. If you are an eligible customer, then known lenders may approve your application within 24 hours*. This advantage of the working capital loan could be lifesaving for firms if they are facing financial emergencies. 

3.They are collateral-free

Applying for the working capital loan does not mean pledging any collateral. If your CIBIL score is higher, you can get the loan approval faster and at a lower rate. The eligibility conditions and documents needed for the working capital loan are less complex. All eligibility conditions are mentioned on the website of the lender you want to apply with. This way, you can prepare in advance and avoid the chances of rejections.    

What are the disadvantages of working capital loans?
Higher loan interest rates

Since the working capital loans are unsecured, lenders charge a higher rate of interest to mitigate the chances of possible defaults. But if your credit score is robust, you can negotiate for an affordable interest rate and pay lower EMIs. The best ways to keep your CIBIL score higher is by making timely repayments towards your loans and other debts. 

Since you are now aware of the working capital loan's pros and cons, you can approach it with confidence to manage it easily.     

Bajaj Finserv offers pre-approved offers on working capital loans, personal loans, home loans and more. It is to simplify the processing of the loan. 

You can check out your pre-approved loan offers today after sharing your basic details such as your name and mobile number.