A strong and secure capital is the foundation of any good business. Small to medium scale businesses should be especially careful about their working capitals and where they acquire it from.
Loaning working capitals has recently been appreciatingly welcomed in the market, especially by SMEs including electricals and electronics businesses.
Why Do You Need A Working Capital Loan?
- Loaned working capital can effectively eliminate problems of regular cash flow
- Businesses have recorded increased profits and greater sales margins
- The credit limit for loaning out working capital to SMEs is relatively higher, with a lower interest rate
- Many loan providers provide customized working capital loans to specific ventures such as electronic and electrical market which allows features like collateral-free terms
Management Of Working Capital For Electrical and Electronics Market
Like any other business, the electronics and electrical businesses need to source their capital from various places. Along with that, methodical management of finances is a necessary driving force for the success of any venture.
Working capital loans or liquidity loans are mainly categorized as:
- Short-term liquidity loans: these last for a minimum period of three months to less than one year. Short-term working capital loans mainly function as turnover funds.
- Medium-term Working Capital loans: with a loaned period of 1-3 years, these funds are primarily used as turnover funds for day-to-day production and operation in a company.
Most electronic and electrical businesses depend on initial bulk capital, profits, and fixed assets for the functioning of the business. But what you must keep in mind is that this field of business is a day-to-day affair which requires regular sourcing of cash. In such a scenario, working capital loans tend to benefit an SME business owner to a great extent.
Understanding Working Capital Loans
A Working Capital loan is the capital your company requires for short-term goals and investments. The company’s assets and liabilities that hold for a short-term count as its working capital.
For example, if your electronics company requires several bills to be written every day, a billing machine would be a better alternative to save money and time. The acquisition of a billing machine would thus require working capital.
Loaning Working Capital will not only ensure that your businesses run smooth but will also allow you the repayment of short-term debts and fulfilment of current expenses. Management of inventories, short-term assets and liabilities, and payable accounts is of utmost importance while running the company on working capital.
Working Capital Loans For Small Businesses
While working capital can serve the needs of large-scale ventures, small and medium scale businesses have markedly performed well in the market with a loaned working capital. The only difference is their market footprint size. Businesses that deal in electronics, electrical appliances, hardware appliances can greatly benefit with loaned working capital. Retail business also requires regular cash flow and will perform excellently well with loaned working capital.
There are many banks both private and public that provide businesses with working capital loans. The ICICI Bank Working Capital Finance, HDFC Working Capital Finance, and the Channel Financing Program by YES Bank are some well-known working capital schemes amongst Small to Medium Scale Business owners.
The HDFC Working Capital Finance provides capital regarding cash credit, letter of credit, and term loan. All in all, if your business requires regular cash flow, availing Working Capital might be a good option for you.
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