Working Capital
Boost Your Cash Flow with a Flexible Working Capital Loan!
What is Working Capital?
Working capital is the difference between a company’s current assets and current liabilities on its balance sheet. It reflects the liquid resources available to run day-to-day operations and indicates short-term financial health.
We help businesses maintain strong working capital with tailored loan solutions that ensure uninterrupted growth and smooth operations.
Concept of working capital
Working capital, or net working capital (NWC), measures a company’s short-term financial health by subtracting current liabilities from current assets. Current assets include cash, accounts receivable, and inventory, while current liabilities encompass accounts payable and short-term debts. Positive working capital indicates a company can easily cover its short-term obligations and invest in operations, reflecting its financial efficiency.
Components of working capital
| Component | Description | How to optimise |
|---|---|---|
|
Cash and cash equivalents |
Funds readily available for use |
Keep a cash reserve for unforeseen expenses |
|
Accounts receivable |
Amounts owed by customers |
Offer incentives for early payments |
|
Inventory |
Goods held for sale or production |
Avoid excessive stock, use demand forecasting |
|
Accounts payable |
Amounts owed to suppliers |
Negotiate favourable payment terms |
|
Short-term debt |
Loans or debts due within the next year |
Refinance high-interest loans |
Formula to calculate working capital
At Genial Financial, we believe understanding your working capital is key to maintaining healthy cash flow and business continuity.
Working Capital Formula:
Working Capital = Current Assets – Current Liabilities
For example, if your business has ₹3,00,000 in current assets and ₹2,00,000 in current liabilities, your working capital is ₹1,00,000. A positive working capital ensures you can meet your short-term obligations comfortably.
Let’s take a closer look at the components that make up working capital:
Current Assets
These are assets that can be converted into cash within 12 months. Common examples include:
- Cash in hand and at bank
- Cash equivalents (such as short-term government securities)
- Accounts receivable (unpaid customer invoices)
- Inventory (raw materials, work-in-progress, finished goods)
- Short-term investments
- Prepaid expenses (like insurance or rent paid in advance)
Current Liabilities
These are obligations your business needs to settle within a year. They include:
- Accounts payable (payments due to suppliers)
- Bank overdrafts
- Statutory dues (GST, income tax, payroll taxes)
- Wages and salaries
- Office rent
- Short-term business loans
- Outstanding operational expenses
At Genial Financial, we offer tailored working capital solutions to help you manage these components efficiently, keeping your business agile and financially strong.
Cash Credit
Cash Credit is a short-term financing option that allows businesses to withdraw funds from their bank account even if the account balance is zero. It’s a revolving credit facility, usually secured against inventory, receivables, or other current assets, and is ideal for managing day-to-day working capital needs.
We offer flexible cash credit solutions to help businesses:
Maintain smooth operations during cash flow gaps
Purchase raw materials or stock inventory
Manage short-term operational expenses
Avoid delays in payments to suppliers
With competitive interest rates and easy access to funds, our Cash Credit facility ensures your business never slows down due to working capital shortages.
Overdraft Facility
An Overdraft is a flexible credit arrangement that allows businesses to withdraw more money than what is available in their current account, up to a pre-approved limit. It’s a useful short-term financing tool for managing temporary cash flow mismatches and urgent financial needs.
Our overdraft facility is designed to give your business:
Quick access to extra funds during emergencies
Flexibility to cover unexpected operational expenses
Smooth payment handling when inflows are delayed
Interest charged only on the amount utilized
With minimal documentation and easy renewals, our overdraft service helps you stay in control of your working capital—without disrupting business continuity.
Trade Finance
Trade Finance refers to the financial products and services that help businesses manage the risks and complexities associated with international trade. It acts as a bridge between exporters and importers, ensuring that both parties can trade safely and efficiently. Trade finance helps to reduce the risks involved in trading across borders, such as non-payment, fraud, and currency fluctuations.
Our Trade Finance solutions include:
Letter of Credit (LC): A guarantee issued by a bank on behalf of the buyer, assuring the seller of payment once the terms and conditions are met.
Trade Credit Insurance: Protection against non-payment or delayed payments, particularly when dealing with international customers.
Supply Chain Financing: Facilitating the payment process between suppliers and buyers, ensuring smooth trade flow.
Documentary Collection: A payment method that ensures goods are shipped only after the buyer makes payment or a commitment to pay.
With our comprehensive trade finance solutions, businesses can:
Minimize risk and ensure timely payments in international transactions
Improve cash flow by securing financing for trade activities
Expand into global markets with confidence
Dropline Overdraft
A Dropline Overdraft is a specialized form of overdraft facility offered by banks, providing businesses with a flexible credit line that can be accessed as needed, up to a pre-approved limit. Unlike regular overdrafts, a dropline overdraft allows businesses to repay borrowed amounts gradually, with the credit limit reducing as the balance is repaid.
Key features of Genial Financial Consultants’s Dropline Overdraft include:
Flexible Access to Funds: Businesses can withdraw funds as needed, ensuring smooth cash flow management.
Reduced Credit Limit Over Time: The overdraft limit decreases as the balance is repaid, helping businesses manage their finances more effectively.
Ideal for Short-Term Financing Needs: It’s perfect for handling temporary working capital requirements or managing fluctuations in cash flow.
Lower Interest Rates: Interest is charged only on the amount utilized, which helps in reducing overall borrowing costs.
With Genial Financial Consultants’s Dropline Overdraft, businesses can enjoy a structured and flexible financing solution that supports operational continuity without the stress of rigid repayment schedules.
Working Capital FAQs
Working capital is the difference between a company’s current assets and current liabilities. It represents the funds available to cover day-to-day operations, ensuring that the business can continue to function smoothly without facing liquidity issues.
Working capital is critical for maintaining liquidity, managing short-term expenses, and supporting business growth. It ensures that a business has the cash flow needed to meet its operational costs, such as paying suppliers, employees, and other immediate expenses.
The formula for working capital is:
Working Capital = Current Assets – Current Liabilities
For example, if a business has Rs. 5,00,000 in current assets and Rs. 3,00,000 in current liabilities, its working capital would be Rs. 2,00,000.
Working capital financing can be obtained through various options, including:
Cash Credit
Overdraft Facility
Trade Finance
Dropline Draft
Each option provides flexibility to businesses to manage their operational expenses and cash flow effectively.
The ideal working capital varies by industry, business size, and operational model. However, it’s important to have enough working capital to cover your short-term liabilities and ensure that you can manage day-to-day operations without disruption.
To improve working capital, you can:
Speed up the collection of accounts receivable
Reduce inventory levels without affecting sales
Negotiate better payment terms with suppliers
Use short-term financing options to fill any gaps in liquidity
Negative working capital occurs when a business’s current liabilities exceed its current assets. This can lead to cash flow problems, delays in paying suppliers, and the risk of insolvency. It can also make it more difficult to obtain financing or investor confidence.
Yes, at Genial Financial Consultants, we offer a range of working capital financing options to help businesses manage cash flow, including Cash Credit, Overdraft Facility, and Trade Finance. Our solutions are designed to meet your specific business needs and provide you with the flexibility you require to run your operations smoothly.
Yes, Genial Financial offers tailored working capital financing solutions for small and medium-sized enterprises (SMEs). We understand the unique needs of small businesses and provide flexible options to ensure that you have the necessary funds to grow and sustain your operations.
