How can working capital loans help you overcome short-term liquidity crunch

Posted by Sumit Dahiya on November 9th, 2018

It is undeniably true that a business’s working capital is its fuel. But why is it so? As commercially defined, working capital means the amount of capital required to carry on your business. In some sense, a good comprehension of your business’s working capital will not only reflect the financial health of your business but also its liquidity status. Such a deep-seated understanding will enable you to respond better to the needs of your business and circumvent undesirable crises.

As said above, a short term liquidity crunch can impair the efficiency of your business especially if it is a small or a medium sized business. Unlike big corporations, SMBs do not have access to large capital markets. Hence, if this working capital shrinks, it will adversely and quite severely affect the SMBs. Therefore, it is advisable and wise to maintain a certain level of working capital in your firm so that you can pay off your short term debts and expenses and also make better future investment decisions with the amount set aside from the working capital.

To kick start your business or to expand your domain, you must ensure that you have sufficient funds available at all times. Your earlier stock of capital might not be cutting it for your business needs now and hence it becomes even more imperative for you to know of the other viable options and way to procure capital.

In this regard, the easiest and safest way out is to go for a working capital loan in order to overcome the short-term liquidity crunch.

How can that be done? What are the benefits of it? Loans, as it is, are a great way of obtaining urgent cash. However, here we have listed down a few advantages of this credit method over the others.

Working capital loans have several advantages over other types of finances such as:

1. Savings on interest: Several banks offer the working loan capital as a line of credit which also sometimes called the working capital limit. In this case, you do not need to pay any fixed EMI as you just need to pay the interest on the amount used within a month and not on the entire loan amount.
2. No collateral needed: As opposed to other kinds of loans, here you don’t need to exchange some collateral in order to obtain the amount. You are therefore relieved of the worry of risking your collateral.
3. Processing is quick: Gaining approval for this kind of loan is quick and easy. The digital financial institutions require only very basic and minimal documentation to be able to advance the loan requirement.  Due to their speedy processing, these loans are best suited to your urgent needs and can come in handy in all kinds of emergencies.
4. Flexibility: These loans can be used according to your discretion and as you deem fit. It is only understandable that in a business not everything can be planned. Several situations arise out of the blue but that shouldn’t mean you can’t be prepared for them. These loans can keep you safeguarded against those crises. You also don’t have to submit any information to the financial institution regarding the usage of the loan.
5. Full control: When opting for this credit line, you absolutely need not compromise on the autonomy and ownership of your company. You only to need to be bothered with paying the EMI’s on time and there is no interference from the side of the lender at any point of time. You will be in full control of your company.

 The best digital lender for this line of credit is Indifi. It prioritizes the needs for finance for small businesses which have the intent and potential to expand. Due to its technology-based approach, Indifi can identify promising businesses thus opening the doorway to greater opportunities for them.