What Is Working Capital Finance?
In manufacturing, trading, and contracting sectors, liquid cash is continually invested into raw materials, work-in-progress, finished inventory, and unpaid customer receivables. The period between paying suppliers and collecting cash from sales is the operating cash cycle.
Working capital financing provides revolving credit lines that inject liquidity into your business, allowing you to fulfill larger purchase orders, secure vendor cash discounts, and maintain uninterrupted operations.
Who May Consider This Facility?
- Manufacturing Units: Managing raw material lead times and extended production cycles.
- Wholesale Traders & Distributors: Holding seasonal inventory and offering trade credit to retailers.
- Contractors & Service Providers: Funding mobilization, wage commitments, and milestone billing cycles.
- Rapidly Growing SMEs: Experiencing order book surges that exceed available internal cash reserves.
Key Facilities Covered
Cash Credit (CC)
Revolving credit line secured by hypothecation of stock and book debts, evaluated via monthly drawing power statements.
Overdraft (OD)
Asset or property-backed liquidity allowing flexibility to withdraw and repay as needed with daily interest calculation.
Letter of Credit (LC)
Non-fund based trade instruments enabling raw material procurement from domestic and international suppliers.
Supply Chain / Invoice Finance
Immediate liquidity unlocked against verified customer invoices and trade receivables.
General Appraisal & Documentation Considerations
During credit evaluation, lending institutions typically review:
- 3 Years Audited Financial Statements with complete schedules and tax audit reports.
- Latest 12 months operating bank account statements in original e-format.
- 12 months GST returns (GSTR-3B & GSTR-1) for turnover reconciliation.
- Stock and book-debt aging summary statement.
- KYC documents of promoters, directors, and the legal borrowing entity.
Frequently Asked Questions
Working capital finance is specialized operational credit that provides businesses with liquidity to purchase raw materials, maintain finished stock, pay operational expenses, and manage receivables cycles.
Drawing Power is calculated as the value of eligible paid stock plus eligible trade debtors (within approved aging limits, usually 90-120 days) minus unpaid trade creditors and required bank margins.
Our ex-banker team reviews your historical operating cycle, calculates true working capital gaps using bank appraisal methods (like Nayak Committee or Tandon Committee norms), and structures proposals for lender evaluation.
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