Working capital · Guide
Working capital loans — size the limit before you apply.
Most rejected working capital files are not weak businesses; they are badly sized requests. Here is how banks assess the limit, which facility fits your cycle, and what to fix before the file goes in.
Quick answer
For limits up to ₹5 crore, banks generally sanction 20% of your projected annual turnover as the working capital limit, less your own margin. Interest applies only on the utilised balance, typically 9% – 16% p.a. when secured. Above ₹5 crore the limit is derived from your operating cycle rather than turnover.
Four ways to fund the gap
Cash Credit (CC)
Limit against stock and book debts, drawing power reviewed monthly.
Overdraft (OD)
Fixed limit against property, deposits or banking turnover.
Term Loan
Structured borrowing for equipment, expansion or a permanent working capital gap.
Loan Against Property
Larger, longer-tenure funding when the working capital gap is structural.
Still deciding? Read cash credit vs overdraft.
Estimate the cost of the facility
Monthly EMI
₹54,356
*Indicative EMI. Actual interest rate depends on lender, credit profile & eligibility.
Frequently asked questions
How is a working capital limit calculated?
For limits up to ₹5 crore most banks use the turnover method: 20% of projected annual turnover, less your own margin contribution. Above that they use the MPBF/operating-cycle method — current assets minus current liabilities, funded at 75% of the working capital gap.
What interest rate applies to a working capital loan?
Broadly 9% – 16% p.a. for secured limits and 14% – 22% for unsecured business loans, charged on the utilised balance. Pricing depends on lender, security cover, turnover and bureau conduct.
What documents are needed?
KYC of the entity and promoters, two to three years of audited financials, GST returns, 12 months bank statements of all operating accounts, existing loan sanction letters, stock and debtor statements, and property papers if collateral is offered.
Can a new business get working capital finance?
Vintage below two years usually limits you to CGTMSE-backed MSME limits, invoice/bill discounting against reputed buyers, or a property-backed overdraft. A clean current account and filed GST returns matter more than profitability at this stage.
How long does sanction take?
A secured CC/OD renewal typically takes 2–4 weeks; a fresh limit with property collateral takes 3–6 weeks including valuation and legal. Files fail on documentation gaps far more often than on credit merit.
Indicative ranges across 48+ empanelled banks and NBFCs. Final terms are set by the lender.