Our country is majorly backed by small businesses. As we all know, to run any business, capital is required. Small businesses often face the limitation of not having adequate capital, which stunts their growth and leads to shutdowns. 

SMEs and MSMEs are the drivers that keep our economy strong by contributing to the GDP and generating employment, turning unorganised sectors into organised ones, aiding the ‘Make In India’ initiative, besides other things. 

More often than not, these businesses, despite having a solid labour force, are left with no option but to cut down labour or close down. A major issue these small scale businesses face is the lack of capital. Also, many business owners do not come from a more substantial financial background to pool in more capital for the business. 

Besides, there is a considerable capital expenditure in setting up these businesses, which causes a deficit in the working capital requirement of the business. 

What is Working Capital? 

While in terms of accounting and finance, working capital is the amount arrived at after deducting capital liabilities from capital assets. However, in general, business terms working capital can be understood as the capital required for the day to day functioning of the business. Costs such as raw materials, electricity, printing and stationery, administration expenses form a part of the working capital requirements. 

What is a Working Capital Loan? 

Working Capital loans are specifically structured to meet the working capital requirements of MSMEs in India. These loans help to meet the financial requirements for the daily operations of the business. These loans are shorter in duration and have lower interest rates to promote the availing of these loans, thereby helping businesses not hinder their goals. 

Eligibility Criteria for Working Capital Loans 

The eligibility criteria for all loans are usually lender-specific, but certain requirements need to be met by all. They are as follows – 

1. The minimum age required to apply for a working capital loan is 25 years, and the maximum can be 65 years. 

2. For a small company to avail a working capital, it should have a minimum turnover of INR 10 lakh, besides other requirements concerning turnover that are lender-specific. 

3. Every small enterprise wishing to avail a working capital loan should have an annual income of at least INR 2 lakh as per the last Income Tax Return. 

4. The enterprise wishing to avail of a working capital loan should have a Credit Information Report (CIR, also called CIBIL score) and decent repayment history. 

5. The enterprise desiring to avail a working capital loan should not have a previous record of default in payment of loans with any financial institution. 

6. For individuals, the minimum work experience required to apply for a working capital loan is 2 years in the existing business and a total work experience of 5 years. 

Documents Required to Apply for Working Capital Loans

1. Duly filled application form of the appropriate loan category with recent passport size photographs.

2. Identity proofs of the applicant such as Passport, Aadhar card, PAN card, Voter ID card, Driving License, Birth Certificate, utility bills (water and electricity)

4. Any address proof such as ration card, passport, voter ID etc.

3. Business Plan 

4. Proof of belonging to a particular category such as SC, ST, OBC, Minorities etc.

5. Business establishment certificate, if applicable

6. Working Capital status of the enterprise 

7. Income proof –  Last year’s income tax returns, if applicable

8. Any other document required by the bank 

Benefits of Availing Working Capital Loans

1. Growth and Expansion of Business 

The lack of finance can sometimes lead to losing business opportunities necessary for growth or buying additional assets that can enhance work productivity. When such a scenario arises, it is always advisable to get a loan and not miss the opportunity; we all know they are rare. 

2. Easy Accessible Procedures 

The working capital loans for MSMEs are designed to be simple and hassle-free to avail. Lesser documentation is required, and repayment duration is flexible with lower interest rates. 

3. Provides Security to Your Business 

As we all know, in business, there are always uncertainties. The sometimes unpredictable situation or there might be any emergencies such disasters or breakdowns because which may cause some damage. To overcome this without letting it affect the business, one can opt for a working capital loan. 

4. Helps to Maintain a Balanced Cash Flow 

Sales on credit is a prevalent business practice. However, if too many transactions are done, the working capital required to run the business may shrink, and situations may arise where realising those credit sales may not be easily possible. A working capital loan can soothe under such circumstances. 

Requirements for Availing Working Capital Loans

Whenever one wishes to apply for any loan, there are requirements to be met. Only upon the fulfilment of those requirements will loans be granted. Below is the summarised list of requirements generally needed to get a working capital loan. 

Serial No.Particulars Requirements 
1. Age Limit (for individuals) Minimum age – 25 years Maximum age – 65 years 
2. Turnover A turnover of at least INR 10 lakh for proprietorships, firms, and companies. 
3. Income as per ITR An annual income of at least INR 2 lakh for proprietorships, firms, and companies.
4.Experience A minimum of 2 years of experience in the existing business and overall at least 5 years of experience of a business for proprietorships, firms and companies. 
5Loan StatementsA loan statement is mandatory for proprietorships, firms and companies along with a sanction letter if any loan was taken previously. 
6. Business Vintage Minimum 3 years 


1. These requirements are subject to change depending on the lender. Kindly check with the lender before proceeding for applying for any such loans. 

2. The loan amounts, interest rates etc. depend from lender to lender, and hence it is advisable to enquire with the lender for the same. 

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