Working capital
Working capital finance for Delhi NCR businesses
Most businesses that feel short of money are not unprofitable. They are out of sync — paying suppliers before customers pay them. That is a timing problem, and it has its own set of products.
What is working capital financing?
Working capital financing covers the day-to-day funding a business needs to operate — buying stock, paying staff and suppliers, and bridging the gap between paying out and being paid. Unlike a term loan, which gives a fixed sum repaid over a fixed period, most working capital facilities give you a limit you can draw on, repay and draw again, with interest usually charged only on what you actually use.
The working capital gap, in plain terms
Suppose you buy raw material and pay for it in 15 days, take 30 days to convert it and deliver, and your buyer pays 60 days after that. Your money is committed for 90 days but comes back on day 105. Grow sales by 40% and that gap grows with it — which is why fast-growing businesses often feel poorer than stagnant ones.
A working capital facility funds that gap. It does not fix it. Fixing it means changing terms, collections or inventory policy — which is a cash flow planning conversation, and usually the more valuable one.
Types of working capital facility
| Facility | How it works | Suits |
|---|---|---|
| Overdraft (OD) | A sanctioned limit on your current account that you can draw beyond your balance; interest charged on the amount used | Irregular, unpredictable short-term gaps |
| Cash credit (CC) | A limit set against stock and receivables, with drawing power reviewed periodically against a stock statement | Businesses carrying inventory and debtors — trading and manufacturing |
| Working capital demand loan | A fixed short-tenure loan for a defined operating need | A known amount for a known period |
| Invoice discounting / bill discounting | Funding raised against confirmed invoices, repaid when the buyer pays | Businesses selling to large, creditworthy buyers on credit terms |
| Unsecured business loan used as working capital | A term loan repaid in EMIs, used to fund operating needs | Businesses without stock or receivables to hypothecate |
| Trade credit from suppliers | Extended payment terms negotiated with your own suppliers | Often the cheapest source of all, and the most overlooked |
Which facility fits which problem?
- Recurring, variable gaps → an overdraft or cash credit limit; you pay interest only on usage.
- Stock-heavy trading and manufacturing → cash credit against stock and receivables, if you can maintain stock statements.
- Long buyer credit terms on strong buyers → invoice or bill discounting, which is usually the cheapest way to release receivables.
- A one-off, defined requirement → a term loan, secured or unsecured, rather than a revolving limit.
- Registered MSMEs → check whether scheme-linked or guarantee-backed routes apply before defaulting to a standard facility.
How lenders assess a working capital requirement
For a term loan, a lender asks whether you can afford the EMI. For a working capital limit, it asks a different question: how much operating funding does this business genuinely need, and is the limit being used for the purpose it was sanctioned for?
- Your operating cycle — how long money stays tied up in stock and debtors.
- The quality of your receivables: who owes you, for how long, and how reliably they pay.
- Stock levels and how realistically they are valued.
- Account conduct: how the limit is used, whether it swings, and whether it is ever cleared.
- Consistency between your stock statements, GST returns and bank credits.
How Cavaris Capital helps
We start by working out whether the requirement is a timing gap or a funding gap, because the answer changes the product. Then we size the limit against your actual operating cycle rather than a round number, identify lenders whose working capital policy fits your business type, and prepare the file — including the stock and debtor detail that most applications leave until the lender asks.
Questions people ask
Frequently asked questions
What is working capital financing?
Working capital financing is funding for a business's day-to-day operations — stock, salaries, supplier payments and the gap between paying out and getting paid. It is usually structured as a revolving limit you draw on and repay repeatedly, with interest charged on the amount used, rather than as a fixed term loan.
What is the difference between a working capital loan and a business term loan?
A term loan gives you a fixed amount repaid in fixed instalments over a fixed period, and suits one-time needs such as equipment or expansion. A working capital facility gives you a limit you can use, repay and reuse, and suits recurring operating gaps. Using a term loan for a recurring gap, or a limit for a permanent requirement, is a common and expensive mismatch.
What is the difference between an overdraft and cash credit?
Both are revolving limits with interest charged on usage. An overdraft is generally linked to your current account and assessed on overall financial standing, while cash credit is specifically assessed against stock and receivables, with drawing power reviewed periodically against a stock statement. Cash credit therefore suits inventory-carrying businesses more naturally.
Do working capital loans require collateral?
It depends on the facility and the lender. Cash credit is typically secured by hypothecation of stock and receivables, and larger limits may additionally require property security. Smaller unsecured working capital facilities are available, generally at higher pricing and lower limits.
How is a working capital limit calculated?
Lenders assess your operating cycle — how long money stays tied up in stock and debtors — along with turnover, margins, the quality of your receivables and your account conduct. The aim is to size the limit to the genuine operating requirement rather than to a round number.
Can invoice discounting help with delayed customer payments?
It can, where your buyers are creditworthy and the invoices are confirmed. Invoice or bill discounting releases funds against those invoices ahead of the payment date, and is often cheaper than borrowing generally. It works less well where buyers are small, disputed or slow to accept invoices.
Talk through your funding requirement
Tell us what the money is for, how much you need and by when. We will tell you which route fits, what the file needs to contain, and what is realistic — before you apply anywhere.