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Corporate Funding

Working Capital Limits (Fund Based and Non Fund Based)

Working capital or the measure of a company’s ability to pay off its short-term debt is the difference between current assets and current liabilities.

We are in syndication of Working Capital Limits (Both Fund Based and Non-Fund Based) for Indian companies both in Indian currency as well as foreign currency. We can also propose an enhancement of working capital limits with the optimum utilization of your enhanced facilities.

Working capital loans can help a company in financing inventories, managing internal cash flows, supporting supply chains, funding production and marketing operations, providing cash support to business expansion and carrying current assets.

Every corporate/firm/entity requires working capital finance to meet the entire range of short-term fund requirements that arise within their day-to-day operational cycle.

 

There are many types of working capital finance. It is broadly classified into Fund Based Finance and Non-Fund Based Finance depending upon the requirement of industry, trade and service sector. Following are the key ways of working capital financing

Cash Credit

Cash Credit is a facility to withdraw the amount from the business account even though the account may not have enough credit balance. The limit of the amount that can be withdrawn is sanctioned by the bank based on the business cycle of the client and the working capital gap and the drawing power of the client. This drawing power is determined, based on the stock and book debts statements submitted by the borrower at monthly intervals against the security by hypothecating of stock of commodities and/ or book debts.

Factoring

A trade finance mechanism whereby an exporter sells its export receivables (bills of exchange or promissory notes, or simply issued invoices, which the exporter is selling on an open account basis) at a discount. The company purchasing the receivables is called a factor. Factors are normally specialized Financial Services Companies, but many are owned by banks. Normally, after the factor has purchased a receivable, the importer or buyer pays the factor directly.

Some factors actually issue the invoices to buyers and in effect, operate the exporter’s sale ledgers. Some factors operate on a non-recourse basis i.e. they assume the risk of non-payment. Less frequently, the factor will take recourse to the exporter for all or part of the sums involved in the event of non-payment or delayed payment by the buyer.





Clean Overdraft

Clean Overdraft is an overdraft facility wherein overdraft amount can be utilized for working capital needs. The primary security herein is the property and stock and debtors are considered as collateral security. Further, there is no requirement of submission of monthly stock statement and calculation of monthly drawing power, since the stock statement is to be submitted annually.

Agricultural Income Based overdraft Limit

The OD Limit is ascertained based on the income from agricultural land. The security to be given can be any other property other than agricultural land. The primary security herein is the property and stock and debtors are considered as collateral security. Further, there is no requirement of submission of monthly stock statement and calculation of monthly drawing power.



Buyer’s Credit

Buyer’s Credit is the credit availed by an Importer (Buyer) from overseas lenders i.e. banks and financial institutions for payment of his imports on a due date. The overseas banks usually lend the Importer (Buyer) based on the letter of comfort (a Bank Guarantee) issued by the Importers (Buyer’s) Bank. In fact the Importers Bank brokers between the Importer and the overseas lender for arranging buyers credit by issuing its Letter of Comfort for a fee. Buyer’s credit helps local importers access cheaper foreign funds close to LIBOR rates as against local sources of funding which are costly compared to LIBOR rates. Buyers Credit for goods purchases can be for a period of up to 6 months.

Bank Guarantee

In certain circumstances such as filing for tender or requirement of a government body or dealing with a totally unknown concern, the parties require you to give a bank guarantee to enable you to bid for a contract or supply the materials. That is when you are required to approach us for arranging Bank Guarantee on your behalf. We help you in arranging BG from banks.

Letter of credit is used in both International and Domestic transactions. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letter of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer (holder of th letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped. Further, letter of credit is a cost-effective source of finance for working capital as the bank only charges commission as against interest in case of Cash Credit or Overdraft facility.>