Why Working Capital Loans Are Better Than Business Credit Cards?

Publish Date : 2020-04-14


Why Working Capital Loans Are Better Than Business Credit Cards?

As a small business owner operating in Delhi or any other city in India, you will agree to the fact that management of funds for the small business is one of the most crucial aspects of running a small business. No matter how hard you work for your business, how long you work, how good your product or service is, or how vast are your profit margins. It all is going to add up to nothing if you do not have any control over your finances, i.e. if you don’t manage your business funds in the right manner, your business today or tomorrow is going to crash down.

When you start your small business, you put all your life-long savings into it. In fact, you also borrow from others as well, such as friends and relatives, as your capital contribution. This amount would largely be spent on the acquisition of space for office, machinery or equipment, tools, fittings and fixtures, and various other essentials things for that matter. Where you will be struggling would be the working capital. It is the amount that you require to manage your everyday activities.

Working capital is the money that is required by you to take care of all your day-to-day business expenses like utility bills, salaries, wages, transportation, freight, etc. You need working capital because due to intense competition as well as market norms, you have to sell your goods and services on credit basis. The period might range from 15 days to 90 days. During this period, you need money to take care of your day to day business expenses until your payments are realised. Sometimes, this period can also extend for more than 90 days.

If you have adequate working capital funds with you, then it is going to be smooth sailing for you. Even if you have contingent funds, your small business will survive this period. But what if you do not have enough money in your reserves to sail through this lean period?

You, of course, cannot shut your operations and wait for your payments to be realised. You cannot fire your employees and ask them to re-join once your payments are realised. This is where you need to take the initiative and avail business loans from any of the various financial institutions operating in India. There are several financial institutions in India that offer a business loan to cater to working capital requirements of small business owners like you.

Where to avail Working Capital Loans from?

Now that you have realised that you need to avail a working capital loan for your business, the next decision is to decide where to avail it from, which loan lender would be the best option for it. There are several financial institutions offering unsecured business loans for working capital requirements of all the small business owners. These lenders include private banks, public banks, NBFCs, and online lending companies. Out of all these options, online lending companies and NBFCs offer the best solutions for your requirements for a business loan in Ghaziabad and other cities.

Non-Banking Financial Companies offer working capital loans to help you take care of your urgent business expenses. If your annual turnover is in excess of Rs. 10 Lakhs, then you can avail an unsecured working capital loan of up to Rs. 5 Lakhs with a repayment tenor going up to 24 months. However, you can choose to repay the loan in 12 months as well. Moreover, you have the option to foreclose the loan account without incurring any additional charges. 

Non-Banking Financial Companies follow a transparent online process, wherein you only need to provide the PDFs of your documents online to process your application for a business loan. As they follow a paper-less procedure to process the business loan application, your application would be processed within a few working days. Apart from the CIBIL Score, online lending companies have their holistic credit evaluation process as well, which they use to ascertain your creditworthiness. It increases the chances of your business loan application being approved significantly.

Benefits of Working Capital Loan over Credit Cards

Working capital loans have become a necessity for small business owners as they help them manage your day-to-day expenses without many issues. They offer numerous advantages that help the company see the lean period comfortably.

Following are different ways in which working capital loans help your business: 

  • Payment of Expenses: When you run a business, there are various everyday expenses that you need to take care of. These expenses cannot wait for your payments to be realised, expenses such as freight, tea and water, repair and maintenance, etc. must be cleared immediately. You can use a working capital loan to pay off these expenses and work peacefully. However, a credit card cannot prove to be beneficial here.
  • Payment to Suppliers: You only get a certain credit period from your suppliers within which you must repay the amount owed. Use a working capital loan to make timely payment to suppliers and continue to enjoy the credit facilities they offer. Here, a credit card would not be helpful for you.
  • Payment of Bills and Taxes: There are monthly electricity bills, gas bills, fuel bills, and government taxes that you must pay on time; otherwise, you face the issue of discontinuing of supply. Use a working capital loan to pay these expenses on time and continue your work seamlessly.
  • Payment of Rent: It is better to pay off your monthly rent before your landlord comes knocking on your door. Do not wait for your payments to be realised, use a working capital loan to pay rent on time and continue your peaceful possession of the property.

With such excellent benefits on offer, availing a working capital loan is an ideal solution to numerous problems that might come your way during the usual course of small business. They indeed are the better option when compared to credit cards.



Category :finance
Author Website : Ziploan

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