Whether you are looking to expand your business or start a new venture, you will require working capital funds for sure. Remember, working capital is a go to indicator that allows you to measure the financial health of your business and your well-being.

Company’s working capital = Current assets (CA) – Current liabilities (CL)

Here, CA includes liquid assets like accounts receivables, cash and cash equivalent and CL includes company debts or obligations outstanding in a year.

Typically, financially sound companies show CA greater than CL. Sufficient working capital assists companies balance their profitability and liquidity while aiming for continuous growth.  

There are various ways to avail and manage working capital. These include inventory management, accelerating customer collection, and optimizing supplier payments. In case if you lack the required working capital to meet your business expenses, availing working capital loan is one of the suitable options.   

Check out 4 crucial ways in which a working capital loan can help your business:

  • Improve cash flow

Whether it is an established enterprise or a start-up, both witness ups and downs. However, for any business to survive in either of the conditions, a well optimised working capital is crucial.  Availing a working capital loan helps to maintain a stable stream of liquidity, ensures business sustainability, and allows it to meet various needs like pay salaries, utilities and rent on time, hold required inventories etc. Also, it allows you to invest the proceed for business upliftment.

  • Capitalise seasonal swings

Many businesses are cyclical in nature i.e., it may witness higher demand for its goods in specific seasons or months like summers, winters, or festive times. While businesses are eager on capitalising such seasonal upswings, they are generally worried regarding working capital crunch, holding them back from availing bigger orders. Working capital funds through lenders can assist bridge the gap and equip your business to meet higher demands without stressing much on your investments. 

  • Facilitate growth

One of the major challenges that small businesses witness is inadequate working capital to facilitate business growth. Working capital allows your business to scale up as per its potential while providing room for marginal error. Businesses availing higher working capital through loans hold the potential to take higher orders from customers with zero impact on their current capabilities.

  • Strength to face monetary shortfalls

With working capital loan, you can face any unprecedented crisis with ease as the funds through working capital act as a cushion to manage your crucial expenses and keep your company afloat.

Ending note

One of the effective ways for raising working capital for new business and existing ones is by availing a working capital loan. The loan normally is short term in nature, designed solely to mitigate your immediate cash shortfalls. Thus, you must ensure to avail just the loan amount based upon your business requirement. Also, ensure to compare amongst lenders by visiting the online lending platforms to zero in on the one offering maximum benefits at minimal costs.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.