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6 Easy Ways To Raise Working Capital For Your Business

Every business runs on capital. This need can get further intensified when the business expands or if it launches any new product or service. In such a scenario, a working capital loan can prove to be a convenient way to fulfil business expenses. Generally, a working capital loan refers to the money borrowed from NBFCs or banks in order to fund business operations or pay business bills. Often, businesses don’t have a stable in-flow of funds and have cyclical sales as per the needs of their clients. In such instances, business loans can be taken to keep their operations going. 


So first let’s discuss what is working capital, and then we will look into some easy ways to raise working capital for businesses!


Every business has two kinds of capital:


  • Fixed Capital

  • Working Capital


Fixed capital refers to the money used for more substantial investments like equipment or land purchases. And, working capital refers to the everyday needs of operation like paying salaries, restocking inventory, and other such expenses. It is critical for businesses to maintain a sufficient amount of working capital to make use of opportunities. Now let’s come to easy ways to raise working capital loan for new business or already existing business:


Trade Credit


Every business owner needs to maintain good relationships with trade creditors. They provide credit in the form of business supplies and equipment that can be paid for at a later date. Such an arrangement can give businesses some time to raise more funds and eventually repay these creditors. Do keep in mind that trade creditors gauge the business volumes, past payment records, and current liquidity status before they grant the trade credit.


Merchant Cash Advance


If the business accepts payment through cards, then the owners might want to use the option of a merchant cash advance to raise their working capital. Lenders grant an advance lump sum that is usually repaid through regular card receipts on the POS machine. So, if the business doesn’t have large assets but has regular card transactions each month, a merchant cash advance is the right option.


Bank Overdraft


A bank overdraft is a speedy way of raising short-term funds as it helps with withdrawals over current account balances. The overdraft limit, depends on business credit history, collateral assets, turnover, and the reason for the overdraft.


Working Capital Loans


There are two types of working capital loans business owners can choose from to suit their needs — secured and unsecured loans. These loans are known to boost businesses’ money reserves, either in the short or medium term. One can take these loans from leading digital NBFCs such as Clix Capital. Taking credit from such types of NBFCs will ensure minimal documentation, quick processing, collateral free working capital loans, approvals and customized repayment methods, thus making borrowing loans a smooth process.


Revolving Credit Line


This is arrangement business owners can make with their lender, thus creating an always-available line of credit (up to a specific limit) that can be repaid at convenience — as in instalments or a lump sum amount.


Invoice Discounting


Invoice discounting is the simplest and the most accessible, in which, account receivables and invoices can be used as collateral assets. This short-term mode of raising funds can help cater to more business volume.


From merchant cash advance to working capital loans to invoice discounting, the options of raising working capital are many. All business owners have to do is choose the one that suits their business the best. Lastly, remember to make an informed decision!

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