According to reports, more than 5 million start-ups are founded each year, while 10% of them become successful in the long run. Despite having innovative business ideas, the rest of them fail mainly due to a lack of capital or funding.
To avoid that, entrepreneurs should have a clear idea regarding the working capital meaning, including ways to accumulate funds to fulfill the organizations liabilities from the very beginning.
Ways to grow a business with a working capital loan
Here are some methods you can follow to boost your business growth with a working capital loan:
- Stock up on inventory
Most businesses fail to deliver what they promise, which makes it difficult for consumers to rely on them. In order to solve this issue, business owners can utilise the funds obtained through a working capital loan and stock up sufficient inventory to fulfil the orders they receive.
- Pay back your dues
You need to make sure that your credibility as a borrower never gets hampered since it will directly impact your future transactions. To maintain a decent repayment track record and credit score, you must clear your dues on time.
- Stay prepared for sudden expenses
Medical emergencies, unplanned inventory, quick repairs, etc., cannot be predicted beforehand; however, business owners must be prepared for that. With a working capital loan, you get access to adequate funds that you can make use of to meet these needs.
Apart from these, you can also utilise a working capital loan to run marketing campaigns, hire experienced staff, etc.
Thus, individuals can apply these methods to boost a slow-moving business and get the most of working capital loans.
Benefits of working capital loans
When you are just starting, sustaining self-financing for a prolonged period is difficult as many expenditures are involved in a business. In such a scenario, working capital financing comes as an ideal solution that enables you to cover all the business-related expenses while avoiding the sale of assets.
Here is a list of advantages these types of business loans come with:
- Easier to get financing
Financial institutions offer different types of working capital loans where the process involves simple documentation and flexible repayment terms. The online application procedure has made it easier for borrowers as they can not only save time while applying but also get necessary information easily from the website.
- No need for collateral
One of the biggest perks of this business financing option is that you can obtain substantial funds without having to pledge any collateral against that. This way, you can avoid putting up your assets at risk to raise funds and make the process much safer.
- Multiple usages of funds
As the working capital meaning suggests, it is the amount every business uses to meet certain operational requirements. From handling temporary shortfalls to purchasing raw materials to boost the company’s inventory, working capital loans can be used for all such purposes. Note that in order to ensure operational efficiency, you need to calculate working capital requirements for your business.
- Funding is faster
Unlike other traditional loans, the process of availing working capital loans is less time-consuming and can be completed within a few hours. This further makes it advantageous for business owners to rely on this credit facility when they need immediate cash flow.
- Preserves ownership
Business owners often lean towards venture capitalists or angel investors to raise funds for their businesses. Even though these are some quick and effective ways to obtain a sizable amount, the investors’ involvement in every aspect often becomes a problem. However, with different types of working capital, you can get funds to support your business and retain complete ownership privileges.
Note that such business loans might come with high interest rates; however, opting for pre-approved offers from trusted NBFCs like Bajaj Finserv might help you deal with that. These offers are available on multiple financial products, like business loans, credit cards, personal loans, etc. You can check your pre-approved offer by submitting your name and contact details.
Understanding the financial requirements of your business is essential to run a business smoothly. Apart from the working capital meaning, young entrepreneurs should also know the common mistakes they need to avoid while managing it so that they can prevent losses.
