Running one’s own business can be a very fulfilling and liberating experience but it also means that there are certain factors one should contend with. A business can have a high or a low period and going through lows does not always mean that the business is going to fail. Rather, one should be ready for all kinds of eventualities and make preparations in advance to tide over that period. There might be times while running a business when it might seem that finances are low and sales are low as well, but some amount of money is always required to take the company through till the sales pick up again. This money is needed to run the day to day operations of the business, irrespective of the sales or production. If one does not want to deplete their own personal reserves, then there is no need to worry at all, because working capital loan are just the thing you are looking for.
In fact, there are a number of ways in which working capital can help a business and one should make good use of this loan and watch their company soar in the long run.
Keeps the regular cash flow very smooth
There are many small companies who constantly have to deal with cash problem and there are many things that could have been easily taken care of if there was just a little more cash. The working capital loan can help bridge this gap and as running a small business can prove to be quite expensive initially, the money could also act as a reserve during times of emergency. Even when the sales are low, the employees would have to be paid, raw materials have to be bought to prepare the inventory, and basic regular maintenance of the premises have to be done, along with paying for its rent. One can always get a head- start with this loan and this could make a significant difference in the long run. A working capital loan interest rate from a NBFC like Bajaj Finserv could be anywhere between 9% to 12% and the tenure is mostly between 6 to 12 months.
Make compensation for delayed payments
There are many who are new to business and they often go through the frustrating experience of not getting paid by the clients in spite of making the delivery of time. However, most clients do have a window of 30 days to make this payment but the business cannot wait for the payment for so long. However, a working capital finance can help you make ends meet during that time period and help you run all the operations smoothly as before. Then, as soon as the payment comes in, the lender can be paid back and there are no problems in the business whatsoever.
Preparing the inventory
Thanks to working capital financing, it can be very much possible for a business to keep their inventory full even when the sales are low and keep it ready in advance for the peak season when the demand spikes up rapidly. However, keeping the production up and running during a slow sale period can be tough and this why a working capital loan can come in handy. Acquire a loan to buy the raw material and pay the additional staffs that you might need to prepare the inventory without shelling out anything from your own pocket. And when the peak season arrives and you have made your sales, pay back the lender from the profit.
Upgrade the equipment
To maximize production and reduce production time in the future, it is important to upgrade one’s equipment from time to time. Opt for a working capital loan to buy latest equipments for your business and once your company starts making a profit owing to the rapid production of better quality products, you can easily pay off the loan.