Overview
Best Working Capital Loans for New Business
Startups in India at Loanadda. Best Interest Rate on Working Capital Finance,Funding Needs. Working capital loans is applicable for Small, Medium enterprises to augment their working capital requirement as well as meet their daily operational expenditure. This loan can be either secured or unsecured and is usually for a short duration of about 12 months. The interest rate usually ranges between 11%-16% depending upon the lending institution. Working capital loans usually go through an annual review process.
Collateral accepted for Working Capital Funding include:
- 1. Stock.
- 2. Book Debts.
- 3. Additionally, banks may ask for Commercial/Residential property as incremental security.
Types of Working Capital Loans
- Bank Overdraft Facility :- An overdraft allows business to borrow money through their current account. One advantage of this is that the borrower only pays interest for the amount that has been overdrawn.
- Bank Guarantees :- A bank guarantee is when the lending institution guarantees that the liabilities of the debtor will be met, if the debtor fails to settle a debt.
- Letter of Credit :- A letter of credit from a bank guarantees that the seller will receive his specified amount on a specified date if the delivery conditions are met as decided.
- Packing Credit (PC) :- Packing Credit is offered to exporters to help them finance the purchase and import of raw materials, and the processing and packing of the goods meant for export.
- Post Shipment Finance :- Post Shipment Credit is offered to exporters to help them finance export sales receivables, after the date of shipment of goods till the date of realization of export proceeds.
- Bill Discounting :- While discounting a bill, the Bank buys the bill (i.e. Bill of Exchange or Promissory Note) before it is due and credits the value of the bill after a discount charge to the customer's account. The transaction is practically an advance against the security of the bill and the discount represents the interest on the advance from the date of purchase of the bill until it is due for payment.
- Buyer’s Credit :- A loan facility extended to an importer by a bank or financial institution to finance the purchase of capital goods or services and other big-ticket items. Buyer’s credit is a very useful mode of financing in international trade, since foreign buyers seldom pay cash for large purchases, while few exporters have the capacity to extend substantial amounts of long-term credit to their buyers. A buyer’s credit facility involves a bank that can extend credit to the importer, as well as an export finance agency based in the exporter's country that guarantees the loan. Since buyer’s credit involves multiple parties and cross-border legalities, it is generally only available for large export orders, with a minimum threshold of a few million dollars.
STEPS FOR WORKING CAPITAL LOANS- WORKING CAPITAL FINANCE
The illustration below indicates what to expect at every step during the loan evaluation process.
It helps understand how the credit decisioning works in banks and the steps they take before deciding to accept or reject a loan/ credit card.
Applicant Fill Out A Loan Application Form.
Documents Hand Over To The Bank.
Bank Check Your Reports And Cibil Score.
High Cibil Score Leads To Eligibility Check Basis Documentation.
Documents For Working Capital Loan Requirement
Most banks follow the same general rules in terms of document requirement. There may be a few changes in certain cases, in which case, our loan officers will guide you personally to complete the documentation process. Salaried individuals.
1. Form 16 of last 2 years or Income Tax Returns.
2. Salary slips of last 3 months.
3. Last 6 months bank statement reflecting salary credits.
4. ID/ Age Proof - PAN Card/ Passport/ Signature Proof/ Aadhar Card and Residence Proof – Passport/ Utility bills/ Bank Statements.
5. Cheque of Processing Fee.
1. Age proof of all the partners in the form of PAN Card, Passport or Aadar Card.
2. PAN Card of the company.
3. Residence proof of all the partners – Utility Bills/ Passport/Bank statement/ Registered rent agreement.
4. Proof of Business - Shop and Establishment Certificate/Vat Registration Certificate/ Service Tax Certificate.
5. Latest 3 years Income Tax returns with profit and loss and balance sheet duly audited by CA.
6. Latest 12 months bank statement of the Company and of the Partners’ Savings Bank Account.
7. Existing Loans' Sanction letters accompanied with repayment track.
8. Business profile on the letterhead of the company.
9. ID/ Age Proof - PAN Card/ Passport/ Signature Proof/ Aadhar Card and Residence Proof – Passport/ Utility bills/ Bank Statements.
10. Cheque of Processing Fee.
1. Application form duly filled with photographs of directors.
2. Age Proof of Directors - PAN Card, Aadhar Card, passport.
3. Residence proof of all the partners – Utility Bills/ Passport/Bank statement/ Registered rent agreement.
4. PAN Card of Company.
5. Education Qualification - A professional qualification certificate in case of Doctors/CA/Architects.
6. Proof of Business - Shop and Establishment Certificate/Vat Registration Certificate/ Service Tax Certificate.
7. MOA, AOA, List Of Directors, Share Holding Pattern of the Company.
8. Last 3 years IT returns with Profit and Loss account and balance sheet duly audited by CA.
9. Latest 12 months bank statement of Company of all current accounts and the same for Director’s Savings Bank Account.
10. Existing Loans’ sanction letter with repayment track of company and Individual Directors.
11. Business Profile on the Letter Head of the Company.
12. ID/ Age Proof - PAN Card/ Passport/ Signature Proof/ Aadhar Card and Residence Proof – Passport/ Utility bills/ Bank Statements.
13. Cheque of Processing Fee.
Your eligibility for Home Loan is determined by the following factors:-
Income/ Other Income
Age
Qualification
Property value
No of dependents
Bank Balance
Assets/Liabilities