WORKING CAPITAL LOAN
A working capital loan is a loan that is taken to finance a company's everyday operations. These loans are not used to buy long-term assets or investments and are used to provide the working capital that covers a company's short- term operational needs like payroll, rent, and debt payments. In this way, working capital loans are simply corporate debt borrowings that are used by a company to finance its daily operations.
Working capital loans can be segregated into two parts:
1. Fund based Credit – offers immediate credit to borrower (Cash Credit, Term loan, OD, DOD, Adhoc loan)
2. Non Fund Based Credit – offers actual funding for business operations (Letter of credit, Bank Guarantee, LC Advising / Confirming Services