Working Capital & Term Loans

Facility size	₹20–150 crore
Types	Cash credit, working capital demand loan, term loan, overdraft
Indicative pricing	9–13% p.a. at banks, 13–17% at NBFCs. Processing fees 0.5–2%. Indicative market ranges, July 2026.
Security	Usually hypothecation of stock and receivables as primary security; collateral and promoter guarantees are often required, particularly at banks
Tenor	Working capital limits are sanctioned for a year and renewed annually; term loans typically run 3–7 years
Lenders	Banks, NBFCs, AIF Category II debt funds, and private credit
Timeline	Market standard is 4–12 weeks. Clean mandates have moved from first conversation to disbursement in as little as 2–10 days.

What we can arrange

• Cash credit and overdraft limits against stock and receivables, for companies setting up their first large limit or adding a second banker.
• Working capital demand loans for the predictable base requirement, at a lower rate than the revolving portion.
• Limit enhancements on existing facilities, either with the incumbent lender or by adding a second lender alongside.
• Term loans for capex and expansion — new lines, plant and machinery, capacity additions, and acquisitions, repaid over three to seven years.
• Unsecured working capital where collateral is limited, through NBFCs and private credit. See unsecured business loans.
• Refinancing of existing facilities at better pricing or looser covenants, including takeovers of limits sanctioned years ago at rates the market has since moved past.

How lenders size a working capital limit

Two methods dominate in India, and it is worth knowing which one your lender is applying, because they can produce very different numbers for the same business.

The working capital gap method. Add up the current assets the business needs to run — inventory, receivables, stores, advances to suppliers. Subtract the current liabilities that fund them, mainly trade creditors, excluding bank borrowing. What remains is the working capital gap. Lenders typically fund about 75% of it and expect the balance, the margin, to come from your own long-term funds. This is the standard approach for larger limits and it rewards a business that can document its cycle properly.

The turnover method. The limit is set as a percentage of projected annual turnover, commonly around 20%, with the borrower contributing a further margin of roughly 5% from own funds. It is faster and simpler, and lenders lean on it for mid-sized limits and where the accounting is straightforward. On a company projecting ₹300 crore of turnover, this method points to a limit of around ₹60 crore.

Two things then decide whether you actually get the number the formula produces. Projections have to be credible — a turnover forecast the last three years do not support will be cut back by the credit team. And at renewal, utilisation matters more than any formula. Draw ₹40 crore against a ₹60 crore limit all year and the next sanction will be sized at what you used, not what you asked for. Persistent full utilisation with no headroom is read the other way: a limit that is too small, and a case for enhancement.

What lenders look at

• Revenue trend and margins. Three years of direction matters more than one good year. Falling margins on rising revenue invites questions.
• The operating cycle. Inventory days plus receivable days minus payable days. A ninety-day cycle needs a materially larger limit than a thirty-day cycle at the same turnover, and lenders will fund it if you can show it.
• Banking turnover versus declared revenue. Credits in your bank accounts should reconcile with GST filings and audited revenue. Unexplained gaps are the fastest way to lose a credit team.
• Cheque returns and inward bounces. A handful of technical returns is survivable. A pattern of returns for insufficient funds usually ends the conversation.
• Existing limits and their utilisation. How much is sanctioned across all lenders, how much is drawn, and whether the account has ever been irregular or overdrawn.
• Collateral available. Property, fixed deposits, or unencumbered assets. Collateral does not just improve approval odds, it moves the rate.
• Promoter profile. Bureau records, other group exposures, guarantees already given elsewhere, and the group's overall leverage.

Documents you will need

The standard borrower file, plus the working capital specific set that most companies underestimate.

• Audited financials for three years, with schedules and the auditor's notes
• Current-year provisional financials and the latest management accounts
• Income tax returns and GST returns for twelve months
• Bank statements for twelve months across all operating accounts
• Existing sanction letters, current outstanding, and repayment track record
• Stock and debtor statements, monthly, in the format lenders accept, with ageing of receivables
• CMA data — the projected balance sheet, profit and loss, fund flow, and working capital assessment lenders use to justify the limit
• Order book, major customer and supplier concentration, and credit terms on both sides
• KYC of the company and promoters, constitutional documents, shareholding pattern, and board resolutions
• Collateral documents where security is offered: title deeds, valuation, approvals, and tax receipts

Debtor ageing and stock statements deserve attention. A limit is renewed or enhanced on the strength of these monthly submissions, and a file where receivables over ninety days are large and unexplained is priced accordingly.

How the process works

1. Assessment. We work out the limit your operating cycle actually justifies under both sizing methods, and compare it with what you have today. Sometimes the finding is that the existing facility is mis-structured rather than too small.
2. Structuring. Splitting the requirement between cash credit, working capital demand loan, and term debt, deciding what security to offer, and sequencing an enhancement against a takeover. This is where most of the pricing is won or lost.
3. File preparation. Financials, CMA data, stock and debtor statements, and the banking summary assembled into one package that answers the credit team's questions before they are asked.
4. Lender process. The file goes to a matched set of banks and NBFCs in parallel. Term sheets are compared on the whole cost — rate, processing fee, collateral demanded, covenants, and how the account will be reviewed each year.
5. Sanction, documentation, and disbursement. Sanction letter, security creation and charge registration, execution of facility documents, and limit activation. For takeovers, the outgoing lender's dues are settled and its charge released as part of the same step.

Common questions

My bank will not increase my CC limit — what are the options?

Four practical routes. Add a second bank alongside the first under a multiple-banking or consortium arrangement, so the existing limit stays and new limits come from elsewhere. Take an NBFC working capital demand loan on top, priced higher but faster. Move the whole facility to a lender with more appetite for your sector. Or free up capacity by financing collateral separately. A refused enhancement is usually an exposure or policy decision — see the alternatives after a bank says no.

What is the difference between cash credit and a working capital demand loan?

Cash credit is a revolving limit: draw and repay within a ceiling, pay interest only on what is used, and pay a premium for that flexibility. A working capital demand loan is a fixed drawdown for a defined period, commonly 30 to 180 days, at a slightly lower rate because the lender knows the tenor. Most companies with a stable base requirement should split the limit — the predictable portion as WCDL, the swing as cash credit.

Can I get working capital without collateral?

Yes, for companies with strong and provable cash flows. Banks usually want collateral beyond stock and receivables, but NBFCs and private credit lenders write unsecured facilities of ₹20 crore and above against banking turnover, GST filings, and audited profits, generally with a promoter guarantee. Pricing sits at the upper end of the NBFC range. Where unencumbered property exists, a loan against property is materially cheaper and worth comparing first.

Business ke liye working capital loan kaise milega?

Lender do cheezein dekhta hai: aapka working capital gap — stock aur debtors minus creditors — aur aapka turnover. Limit aam taur par gap ka lagbhag 75% hoti hai, ya projected turnover ka takreeban 20%. Documents: 3 saal ki audited financials, provisionals, ITR, 12 mahine ki GST returns aur bank statements, stock aur debtors statement, CMA data, aur purane sanction letters. Bank ka indicative rate 9–13%, NBFC ka 13–17%. Collateral aur promoter guarantee zyadatar cases mein maangi jaati hai.

If the requirement is asset-backed rather than cycle-driven, lease rental discounting on a leased property or construction finance on a project is usually cheaper than stretching a working capital limit. Sizing, timelines, and what advisories charge are covered in the FAQ, and there is a longer treatment in working capital financing in India.

Pacewell Capital is a debt advisory and arranger, not a lender. All loans and facilities described here are provided by RBI-regulated banks, NBFCs, and funds, subject to their own credit approval, diligence, and documentation. Interest rates, loan-to-value ratios, and timelines stated on this page are indicative market ranges as of July 2026 and are not offers or commitments.