You can take a short-term business loan from Bajaj Finance and manage the day-to-day running of your business when short-term working capital is low. Our short-term working capital loans make applications easy with simple eligibility criteria and minimal documents and make repayment affordable. A long tenure helps you pay small monthly instalments, and an attractive interest rate allows you to repay stress-free.
Our Flexi facility also helps you manage working capital needs effectively by enabling you to withdraw what you need from your sanction and part-prepay at no extra charge. You can also choose to pay just the interest as EMI and reduce EMIs by up to 45%*.
*Conditions apply
Short-term sources of working capital
Short-term sources of working capital are the sources of capital that are available to a business for less than one year. They are used to finance the current assets or the day-to-day operations of a business. Some of the short-term sources of working capital are:
- Trade credit: It is the credit extended by the suppliers of goods or services to their buyers on credit terms.
- Bank overdraft: It allows a business to withdraw more money than it has in its bank account, up to a certain limit.
- Bills discounting: It is a process of selling bills of exchange or promissory notes to a bank or a financial institution at a discounted rate before their maturity date.
- Public deposits: It is a method of raising funds from the public by inviting them to deposit their surplus money with the business for a fixed period and interest rate.
- Short-term loans: It is a loan that has to be repaid within one year or less. It can be obtained from banks, NBFCs, or other financial entities.
FAQs
Short-term working capital refers to funds that help you finance the daily operations of your business. These include inventory or raw material purchase, staff salaries, warehouse or office rent, electricity and maintenance, short-term debt and more.
What is a short term working capital loan? ›
A working capital loan is a short-term business loan intended to help a company make sure it has enough cash to pay for its regular operating expenses. They usually have quick funding and short repayment periods. They're not designed for larger, more long-term purchases.
What is the meaning of working capital term loan? ›
A Working Capital Loan is one that is availed of to fund the day-to-day operations of a business, ranging from payment of employees' wages to covering accounts payable. Not all businesses see regular sales or revenue throughout the year, and sometimes the need for capital to keep the operations going may arise.
What is working capital in very short answer? ›
Working capital is a financial metric that is the difference between a company's curent assets and current liabilities. As a financial metric, working capital helps plan for future needs and ensure the company has enough cash and cash equivalents meet short-term obligations, such as unpaid taxes and short-term debt.
What is short term debt to working capital? ›
Whenever the short-term debt is repaid using cash or cash equivalents, it reduces both current assets as well as current liabilities equally; hence the working capital in absolute terms does not change. However, the working capital ratio changes.
What is an example of short term working capital? ›
Short-term working capital refers to funds that help you finance the daily operations of your business. These include inventory or raw material purchase, staff salaries, warehouse or office rent, electricity and maintenance, short-term debt and more.
What are the disadvantages of working capital loans? ›
- What are the disadvantages of a working capital loan?
- They can be credit-rating dependent or require collateral.
- Loans won't address underlying issues.
- Interest rates can be comparatively high.
Working capital loans (sometimes known as cash flow loans) are term loans that are typically used to fund longer-term investments or purchases.
What are the benefits of working capital loan? ›
There are multiple advantages of Working Capital Loan that offer the business to maintain the accounts payables, payment of overheads, purchase of short term inventory and raw materials, wages and other short terms financial requirements to run the business efficiently.
What can I use a working capital loan for? ›
These loans are not used to buy long-term assets or investments and are, instead, used to provide the working capital that covers a company's short-term operational needs. Those needs can include costs such as payroll, rent, and debt payments.
Working capital is referred to as the capital that is essential for running the day to day operations of a business. Therefore, it is the difference between current liabilities and current assets.
What is short of working capital? ›
Working capital, also known as net working capital (NWC), is the difference between a company's current assets—like cash, accounts receivable/customers' unpaid bills, and inventories of raw materials and finished goods—and its current liabilities, such as accounts payable and debts.
Why is working capital a problem? ›
What are the risks of inefficient working capital management? Risks include cash shortages, strained supplier relationships, cash flow challenges, missed growth prospects, poor investments, and increased financing costs. Efficient management mitigates these risks.
What is the difference between a short term loan and a working capital loan? ›
Repayment: Being a short-term funding options, a working capital loan has a very flexible repayment period/tenure. Meanwhile, term loans come with relatively longer repayment tenures. Amount: Term loans involve bigger amounts, hence the extended repayment period.
Is working capital loan a debt? ›
Summary. Working capital loans are a form of debt financing meant to cover short-term financial needs, such as capital expenditures.
What is the period of a short term loan? ›
Short term loans are called such because of how quickly the loan needs to be paid off. In most cases, it must be paid off within six months to a year – at most, 18 months. Any longer loan term than that is considered a medium term or long term loan. Long term loans can last from just over a year to 25 years.
What is the difference between cash credit and working capital loan? ›
Cash credit is usually renewed every year based on the financial performance of the business. Working capital term loan is a fixed amount of loan that is given for a specific period, usually between one to five years. The interest is charged on the entire loan amount and the repayment is done in installments.
How do you calculate short term working capital loans? ›
Working Capital = Current Assets – Current Liabilities
For example, if a company has $100,000 in current assets and $30,000 in current liabilities, it has $70,000 of working capital. This means the company has $70,000 at its disposal in the short term if it needs to raise money for any reason.
What is a short-term capital example? ›
Short term capital gain refers to any capital gain/profit which an individual gets on sale of short term capital assets. This includes any gain on depreciable assets. Example: Miss Rita purchased the building for Rs 10 lakh and sold it a year later for Rs 15 lakh, a profit/gain of Rs 5 lakh.
