Business Loan
Working Capital Loan for Small Businesses
11 August 2026 · 5 min read
Working capital pressure is rarely about profitability — it is about timing. Choosing the wrong instrument means paying interest on money that sits idle, or running short exactly when you need stock.
The three common structures
- ✓Overdraft: a limit on your current account; interest only on what you use — best for irregular gaps
- ✓Cash credit: a limit against stock and receivables, reviewed annually — suited to inventory-heavy trades
- ✓Term loan: a fixed amount repaid in EMIs — appropriate for a known, one-time requirement
How limits are assessed
Lenders typically work from your operating cycle — the days between paying suppliers and collecting from customers — combined with projected turnover. A longer cycle justifies a larger limit, provided the receivables are demonstrably collectible.
Stock statements and debtor ageing lists matter here. Businesses that maintain them monthly get better limits than those reconstructing figures at renewal time.
Keeping the cost down
- ✓Use an overdraft rather than a term loan for genuinely fluctuating needs
- ✓Sweep surplus balances into the limit account to reduce daily interest
- ✓Review the facility annually — limits set two years ago rarely match today's cycle
- ✓Negotiate processing and renewal charges, not just the headline rate
Want this reviewed for your own case?
An Arthvritti advisor will look at your numbers and tell you what is realistic — including when borrowing is not the right move.
Structure a working capital line