What is a working capital demand loan?
Maintaining optimum working capital is essential to a business’s efficient running. A working capital demand loan is thus available as a flexible financing option that allows businesses to access funds during any capital shortage. This credit facility is readily available to fulfil the operational funding needs.
Available as one of the suitable sources of business finance, Bajaj Finance also offers a unique Flexi facility on a working capital loan. It enables multiple withdrawals from a pre-sanctioned limit, thus allowing access to funds when needed.
Features and Advantages Working Capital Demand Loan
Now that you are familiar with WCDL, let us take a closer look at its features and advantages:
Features
- Flexibility: WCDL provides flexibility in both repayment and fund utilisation, allowing businesses to address immediate working capital needs efficiently
- Quick access: Businesses can access funds quickly, enabling them to manage unexpected expenses or cash flow gaps
- No fixed repayment schedule: Unlike traditional loans, WCDL does not have a fixed repayment schedule. Lenders can demand repayment at any time
- Interest on utilised amount: Interest is charged only on the amount of funds actually used, meaning businesses only pay interest on the portion they utilise
- Easy renewal: WCDL facilities can be renewed or extended after repayment, providing continuous access to working capital as needed
Advantages
- Enhances cash flow: WCDL helps businesses maintain healthy cash flow by providing immediate access to funds, ensuring smooth day-to-day operations
- Suitable for short-term needs: Ideal for managing short-term working capital needs, such as dealing with seasonal fluctuations or temporary cash flow gaps
Understanding the features and benefits of WCDL can guide businesses in making informed financial decisions. It is crucial to compare the terms and conditions from different lenders to find the best option for your business needs.
Interest rate on working capital loan
Bajaj Finance offers working capital loans at competitive interest rates to keep the repayments affordable. The other associated charges, such as processing fees, are also kept nominal for the borrower’s convenience.
Before opting for such a loan, you can use our business loan EMI calculator to compute the monthly instalments amount and plan repayments accordingly.
When Would Taking a Working Capital Demand Loan be a good idea?
WCDLs are ideal debt instruments for businesses facing a lean season. When sales dip or large amounts of receivables remain unpaid, it can severely impact a business’s liquidity, especially for growing businesses. A WCDL is a short-term loan that helps meet regular capital needs and maintain operational efficiency. It ensures smooth cash flow for daily expenses, such as raw material purchases, payroll, and supplier payments, while helping maintain healthy liquidity. This makes it an effective short-term solution for businesses experiencing temporary cash shortages.
WCDLs are perfect for replenishing funds in the short term and bridging the gap between inflows and outflows. They are especially useful for businesses with cyclical operations, where demand fluctuates seasonally. During lean periods, WCDLs can cover financial needs, allowing the business to operate at full capacity during peak seasons.
With a WCDL, the borrower has full control over how the funds are spent. Plus, as a debt financing tool, it does not affect the company's equity.
Alternatives to a working capital demand loan
There are suitable alternatives to working capital demand loans that offer quick and convenient financing. This helps businesses cover their working capital deficits.
Bajaj Finserv offers business loans as a suitable alternative to the working capital demand loan to fulfil the working capital funding needs as and when required. Here is a quick look at the features and benefits of the advance that make it a suitable option for business funding.
Flexi Hybrid feature
The Flexi Loan facility allows businesses to make multiple withdrawals from a pre-sanctioned amount, enabling ready access to funds. It also reduces the overall repayment liability as interest is charged only on the withdrawn amount.
Loans of up to Rs. 80 lakh
Eligible applicants can avail of high-value, collateral-free financing of up to Rs. 80 lakh at affordable rates.
Tenure flexibility: Opt for a suitable Tenure of up to 96 months for convenient loan repayment.
Quick financing: With minimum eligibility and document requirements, get approval within a few minutes of application. Get money in money within the next 48 hours* only.
No end-use restriction: Businesses can also use the funds for other financing needs like office renovation, machinery purchase, expansion plans, etc., along with working capital requirements.
Frequently asked questions
A working capital loan is a loan that has a fixed repayment schedule and a fixed interest rate. A working capital demand loan has no fixed repayment schedule and a variable interest rate. The interest rate of a working capital loan is usually lower than a working capital demand loan, as the lender has more certainty about the repayment.
Some examples of working capital loans are Term Loans, business lines of credit, invoice financing, and business credit cards. Some examples of working capital demand loans are packing credit, invoice factoring, and warehouse financing.
The difference between demand loan and term loan is that demand loan is a loan that has no fixed repayment schedule and can be demanded by the lender at any time, while Term Loan is a loan that has a fixed repayment schedule and a fixed interest rate. Demand loan is usually used for short-term business needs, such as working capital, raw materials, or salaries. Term Loan is usually used for long-term business needs, such as land, equipment, or office space.
WCDL (working capital demand loan) is a type of loan used by businesses to finance their day-to-day operations. It is usually provided by banks and other financial institutions within the assessed working capital limits of the borrower.
Some of the benefits of WCDL are:
- It helps businesses to meet their short-term cash flow needs and cover expenses such as inventory, wages, rent, etc.
- It offers flexibility and convenience as businesses can access funds when they need them and repay them according to their cash flow cycle.
- It can also be used for other purposes such as expanding operations, purchasing equipment, etc., depending on the lender’s terms and conditions.
The time period of a demand loan is typically short-term. The loan is provided for a specific duration, and repayment can be demanded by the lender at any time. This makes it flexible, as businesses can pay back the loan as soon as they have sufficient funds, without being bound by a fixed repayment schedule.
Demand loans can be either secured or unsecured, depending on the terms set by the lender. Secured loans require collateral, while unsecured loans do not. The terms of the loan, including whether collateral is required, are generally based on the borrower’s creditworthiness and the lender’s policies.
