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How to Use Working Capital Loans Wisely

by George Thomas Blogger

Business entities are a group of qualified professionals who work towards an organizational goal. On a general note, people will define business as the motive to earn a maximum profit; that is even right to some extent. But not everyone knows what it takes to make a business succeed. Forget about succeeding; businesses cannot even function smoothly without proper cash in hand. For the smooth functioning of business and to meet daily small or big obligations, entities maintain a separate account of money known as Working capital.

Those businesses that fail to maintain a working capital generally take a working capital loan at a high-interest rate. What they don’t know is that OneNDF ensures working capital loans at a low-interest rate with 5x faster disbursal as they are associated with India’s leading lenders. Being in the field for the last 10 years, I have witnessed that people even fail to use their working capital loans wisely and end up with more debt. The loan amount and the amount we earn are not the same as the amount at all; it's better to use the loan amount cautiously. Today we’ll guide our readers on “ How to use Working capital Loans wisely; keep reading for more.

Must Read: Types of working capital - Benefits & Factors

Identify why you need a working capital loan.

Before taking a working capital loan or any other loan, it is imperative to understand the need for credit. Being a part of a business ecosystem, it is highly important to understand the daily based usage of money. Whether it's the smooth functioning of operations or achieving big organizational goals, the need for liquid assets will be optimal, and business entities generally ignore all these things. When business owners fail to maintain a separate budget for business activities and meet other obligations, they will need working capital loans.

Being an entrepreneur, identify your need for working capital and discuss directly with India’s leading lenders with the help of OneNDF. Generally, business owners acquire this funding category to achieve seamless operational performance and function smoothly and effectively to grow their business in a well-managed way.

Consider all the unpaid debts.

If you have unpaid debts or pending bills, then there is a possibility that lenders may feel hesitant to fund you. Business debts or other liabilities do not seem pleasant in the applicant’s profile if one is applying for working capital loans. It is suggested to pay off all the existing debts and apply for a working capital loan.

Must Read: Different types of Debt Instruments to raise debt funding.

Choose a renowned lender.

Finding the right lender is of utmost importance at the time of taking any credit facility. The right lender is someone who offers less rate of interest, disburses the amount faster and doesn’t charge unnecessarily. Find a renowned lender for your working capital loan using OneNDF and sign the best loan deal to date; they are associated with 99+ lenders (including top Banks & NBFCs).

Manage Business Inventory

Once you have received the credit of the working capital loan, start managing your business inventory effectively if you are serious about managing and using loans wisely. Business owners generally focus on producing more and more inventory, but what they often ignore is that it reduces access to more capital. It is often advised to reduce slow-moving inventory, neglect stock pilling and boost turnover cycles. Better analyze the need based on demand and supply scale and do production accordingly.

Pay your suppliers/vendors timely.

Focus on the bigger picture; one should always pay their bills and pending invoices on time. Making timely payments gives you the power to negotiate, makes you more flexible in the eyes of your supplier, and most importantly, enhances your working relationships with your connections.

Also, paying off all the bills on time before taking a working capital loan will increase your chance of approving the application. Lenders feel unsafe working with businesses that have liability or any unpaid debt.

Track daily business activities and Cash in hand.

Whatever business you run, make sure you track all your business activities in records along with the progress made. Keeping a daily record of all the activities will help you to analyze your performance in the long run. If it's getting tough, take the help of data-driven techniques and analytics to make effective business decisions.

Use mechanisation to keep a record of cash you hold along with the quantity. This way, one knows the exact quantity of inventory required and the available cash.

Read: Demand vs Term Loan - Quick Comparison

Take advantage of Technological advancement.

In the past 10 years, technology has started playing a dominant role in our lives, both personal and professional. Technology-oriented businesses that use automated systems grow very fast as it saves the cost of human capital required. Convert physical transactions into electronic ones for both receivables and payable transactions.

Technological advancement helps reduce delays and inefficiencies such as traditional processing, unpaid invoices and misplaced bills. Technology provides ease and convenience in working management; thus, it is suggested to opt for technical measures.

Bottom line

There are various purposes for which businesses opt for working capital loans, such as paying off rent, paying off debt, employees' salary, office management etc. Working capital loans are required to be used very critically and must be able to generate profits to repay the amount along with the interest rate decided.

In the above module, we have disclosed how to use working capital loans wisely. It is suggested to practically implement all the points discussed above, generate remarkable revenue and make your business function smoothly with the borrowed amount.

Take a working capital loan in easy steps! Get in touch with OneNDF; call us at +917810844844 or ping us on WhatsApp directly.