The net working capital (NWC) represents the difference between the current liabilities and the current assets of a company. Simply put, working capital is the funds which a company requires for all day-to-day operations.
Working capital is a measure of the operational efficiency, liquidity and the short-term financial health of the company. The net capital is a deciding factor to business prosperity. A positive capital indicates the company’s potential to grow. On the other hand, negative working capital can be indicative towards financial mismanagement.
A number of NBFCs offer hassle-free working capital finance to make it easier for small businesses to meet their daily operational requirements in case of a shortfall.
All the details regarding working capital and available loan opportunities have been discussed below.
Calculating net Working Capital Formula
Net capital can be calculated by using the working capital formula, viz. –
Net capital= Current assets – Current liabilities.
Current assets include the account receivables, inventory and other various assets which are available to be liquidated.
Current liabilities include the wages, accounts payable, taxes and the current payables of long-term debts.
Working Capital Loans
It is not always possible to maintain enough funds or asset liquidity to cover all day-to-day operational expenses. Some businesses rely on cyclical sales and therefore do not have enough cash year-round.
In such situations, it is, therefore, best to rely on financial advances. A loan can help make sure that business never runs out of working capital. Therefore, even when the revenues are down, the businesses can still carry on with their daily operations instead of coming to a stand.
What follows are the most common queries regarding working capital loans answered.
Qus 1. Why avail a loan?
Any business can face issues regarding cash flow. In such times, it is better to rely on working capital loans for their finances. NBFCs such as Bajaj Finserv offer such loans without any collateral along with additional benefits such as flexible tenors, nominal interest rates and also makes repayment affordable.
Qus 2. How can loans help strengthen a business?
These loans can be used without increasing one’s financial burden. And in return, it provides an individual with the funds to take care of daily operational costs and liabilities even during off-seasons or periods of low returns. As a small business owner, you should know how loans help keep small businesses alive by providing them with timely financing options which are easy to repay.
They can help in the following ways:
- Manage sales fluctuations
- Maintain cash flow
- Prepare for future bulk orders
- Leverage business opportunities
Qus 3. What are the requirements?
The eligibility criteria for such loans generally are given below:
- Age limit: 25-55 years
- The business should be at least 3 years old
- There should be income tax returns filed for 1 year
Some financial documents may need to be submitted which are helpful for the lender to understand the repayment abilities of the business.
Even though there may not be any present problems with the business, there will be lean periods at times, when there may not be sufficient available cash to cover any unplanned expenditure or delayed payments. A loan in such times can help the business get over the financial crisis and run without any complications.
Using the working capital formula, one can find out the requirements needed, and if required one can avail a loan.
NBFCs like Bajaj Finserv provides opportunities for any business to avail a loan of up to 30 Lakh without any collateral and at affordable interest rates. This ensures that small businesses can refer to such financial aids when needed without any difficulties.
Loans exist to ensure that an enterprise can thrive through any financial shortfall, that they can meet their short-term or long-term goals against a slight increase of their financial liabilities. Therefore, the best way out of a sudden financial crisis for a business is with a business or working capital loan.
