5 Myths about Working Capital Finance

14 Nov 2022

It is very much common for any business to be in a need of financing for a variety of reasons including growth and expansion, seasonal variations, working through operational fluctuations, meeting supply needs for increased demand, etc.

When it comes to availing of working capital finance, many medium and small-scale industries find themselves in a difficult position due to existing myths. The reality is however much different and on the flip side of the coin. Maintaining working capital is the basis of any business’s substantial existence. And the working capital loan can be a perfect partner to maintain the financial health of your business.

Hence, we took the initiative to debunk the top 5 myths you might be having regarding working capital finance.

Myth 1: Only businesses that are not going through good times are in the need of a business loan.

Well, it is natural to think that any business in need of working capital must be going through hard times in terms of cash flows. But it essentially is not so. Working capital helps many businesses in their dire times. It indeed helps them quickly resolve cash flow emergencies.

However, there can be many situations where a business may require extra working capital for opening a new office, expanding the operations in new areas, setting up new infrastructure, installing additional equipment, covering payroll and hiring additional staff, research and development, etc. Depending on the business type, there can be diverse opportunities and reasons for the need for additional finance. Even if a business is comfortably running its operations, the availability of additional capital can help it in grabbing lucrative opportunities and making strategic investments.

Therefore, it may be better to call it a smart investment rather than seeing it as a mere bank loan.

Myth 2: Working capital helps only in meeting short-term financial needs.

While working capital funds help many businesses find a rescue from immediate financial needs. However, it’s not true that the same helps only in the short term. It helps a business seize even limited opportunities that can result in long-term retreats.

For best results, you should always research viable credit options. For example, purchase invoicing can be very ideal for businesses and the funds are properly utilized. It helps you make use of the funds just at the apt place so that the available funds do not get quickly used up at some other places. Such easily accessible purchase financing options help you use funds when you need them and avoid the slippery side of debt.

Therefore, a working capital loan can help a business generate short-term results while fuelling the long-term growth and success for your business.

Myth 3: The working capital loan application process is similar to a traditional loan application with banks.

Well, most of the borrowers are unable to make the best use of traditional loans either because they do not qualify for them or find the process cumbersome. On the contrary, a loan for working capital from an institution such as Oxyzo Financial Services Pvt. Ltd. offers flexible, hassle-free and quick loans with minimum paperwork.

Often, traditional loans are firstly very arduous to apply and secondly, there is a lot of waiting period to receive the funds even after the application approval. Due to this reason, the business may lose opportunities such as bulk discounts available only for a limited period. They may even lose seasonal opportunities.

It may be a better option to try for a loan application with Oxyzo. The processing time for loan applications is very short. And once approved, the business can receive the funds within 2-3 business days.

Myth 4: Working capital finance can harm a business’ credit score.

This is absolutely false. It actually is an opportunity to boost your business’s credit score. You get a chance to show your business is capable of securely financing and repaying the loan on time. It can be the best opportunity to strengthen your business’s creditworthiness.

Myth 5: Your business has to have an established credit history to qualify for such financing needs.

Well, your credit score really matters and there’s no doubt about it. Traditional banks do look into various aspects before approving any loan application. And hence many businesses find it difficult to fit into their criteria. Whereas, with Fintechs like Oxyzo, the creditworthiness of a business is judged on diverse aspects and not limited to what the banks consider. Therefore, their application approval process is flexible, quick and has minimum paperwork.

Even if you do not have an established credit history, you can avail of unsecured loans. It is indeed a good opportunity to establish a good credit score that can help you receive loans at better interest rates in the future. Also, it is a good chance to maintain your goodwill with your vendors, shareholders as well as employees.