Most working capital problems are not profitability problems — they are timing problems. This works out how long your money is tied up, and what size of facility that implies.
₹46,23,288
working capital facility indicated
- Operating cycle
- 75 days
- Total working capital
- ₹61,64,384
- Your own margin
- ₹15,41,096
Your money is tied up for about 75 days between paying for stock and being paid by customers. That gap is what a working capital facility is meant to cover.
Check what facility you could raiseIndicative only. Final eligibility, interest rate, charges and sanction are decided by the lender after full assessment of your profile and documents. Transakt does not lend and does not approve loans.
The operating cycle
Operating cycle = days customers take to pay you + days stock sits before selling − days your suppliers give you
If your customers pay in 60 days, your stock sits for 45 days, and your suppliers give you 30 days, your money is tied up for 75 days. On ₹3 crore of annual turnover — about ₹82,000 a day — that is roughly ₹61.6 lakh of your money locked in the business at any moment.
Lenders normally expect you to fund a margin of it yourself, commonly around 25%, and will consider a facility for the rest.
Why a term loan is usually the wrong answer
A term loan gives you a lump sum and a fixed EMI. But a working capital need is not a lump sum need — it rises and falls with your cycle. An overdraft or cash credit facility lets you draw what you need and repay when you are paid, with interest only on what you actually use.
Using a term loan to fix a cash flow gap adds a fixed monthly outflow to a business that already has a timing problem. It very often makes things worse.
Three things that shrink the gap without borrowing at all
- Collect faster. Cutting receivable days from 60 to 45 on ₹3 crore of turnover releases about ₹12.3 lakh. That is usually easier than arranging a loan.
- Negotiate supplier terms. Every extra day of credit from suppliers is a day you do not have to fund.
- Turn stock faster. Slow-moving inventory is the most expensive money in most small businesses.
Check what facility you could raise
What is the difference between an overdraft and cash credit?
In practice they work similarly — a limit you draw against and pay interest only on usage. Cash credit is usually secured against stock and receivables with periodic statements required; an overdraft is often against property or a deposit. Which one you are offered depends on the lender and on what security is available.
How much working capital limit will a lender give?
Commonly around 20% to 25% of projected annual turnover, adjusted for your actual operating cycle and the margin you contribute. A business with a genuinely long cycle can justify more, but you will have to evidence it.
Do I need to renew a working capital facility?
Yes, typically every twelve months, with fresh financials and often a stock and receivables statement. Diarise it — a facility that lapses because paperwork was late is a painful and avoidable problem.