Working Capital Loan Eligibility, Interest Rates & Application Process
Every business needs a steady cash flow to operate smoothly. Whether it’s purchasing inventory, paying staff salaries, or managing daily expenses, maintaining adequate working capital is crucial.
When cash flow becomes tight, a working capital loan can provide the financial cushion needed to keep operations on track.
In this blog, we’ll cover everything you need to know about working capital loan eligibility, interest rates, and the application process.
What Is a Working Capital Loan?
A working capital loan is a short-term financing option designed to cover a company’s everyday operational expenses. Unlike loans used to buy long-term assets or investments, working capital loans are meant to support a business’s day-to-day functions, such as rent, payroll, inventory, and utilities.
These loans are ideal for businesses that experience seasonal fluctuations or need temporary liquidity without altering ownership or long-term financial structure.
Eligibility Criteria for Working Capital Loans
Lenders evaluate several factors to determine a business’s eligibility for a working capital loan. Although specific criteria can vary depending on the lender, here are the common requirements:
1. Business Age
Most lenders require the business to be operational for at least 1–2 years. Startups may have fewer options unless backed by strong financials or collateral.
2. Annual Revenue
Lenders typically look for a minimum annual turnover, often ranging from ₹10 lakhs to ₹1 crore or more, depending on the loan amount and institution.
3. Credit Score
A good personal and business credit score (generally 650 or above) improves the chances of approval and qualifies you for better interest rates.
4. Business Type
The business must be legally registered and operating within permitted sectors. Proprietorships, partnerships, LLPs, and private limited companies are usually eligible.
5. Profitability and Cash Flow
Strong financial statements and consistent income make a strong case for loan approval.
Interest Rates on Working Capital Loans
Interest rates for working capital loans can vary significantly depending on factors like creditworthiness, loan tenure, lender policies, and the nature of the business. As of 2025, rates typically range from:
- 9% to 18% per annum for secured working capital loans
- 12% to 24% per annum for unsecured loans
Other costs may include processing fees, prepayment charges, or late payment penalties. It’s essential to compare offers from banks, NBFCs, and online lenders to get the best deal.
Application Process for a Working Capital Loan
Applying for a working capital loan has become simpler and faster with digital platforms. Here’s a step-by-step guide:
1. Assess Your Requirements
Before applying, calculate how much working capital you need and why. This helps you avoid overborrowing and ensures better chances of approval.
2. Check Eligibility
Visit the lender’s website or use an eligibility calculator to check if you qualify. Having your credit score and financial statements ready will speed up this step.
3. Compare Lenders
Shortlist banks, NBFCs, or fintech lenders offering competitive interest rates and flexible repayment options.
4. Gather Documentation
Typical documents include:
- Business registration proof
- PAN and Aadhaar of owner(s)
- Income tax returns (last 1–2 years)
- Bank statements (last 6–12 months)
- Financial statements (Profit & Loss, Balance Sheet)
- GST returns
5. Submit the Application
Complete the application form online or in person and upload or submit your documents.
6. Verification and Approval
The lender will verify your documents and business viability. If everything is in order, approval may come within 24–72 hours, with disbursal soon after.
Final Thoughts
A working capital loan can be a lifeline for businesses needing short-term liquidity. Whether you’re dealing with seasonal dips or rapid expansion, these loans offer the flexibility to manage day-to-day operations without disrupting long-term goals.
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