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Updated August 2026

Working Capital Loan up to Rs 25 Crore - Fund Your Daily Operations

Overdraft, Cash Credit, WCTL, Invoice Financing - the full working capital toolkit for MSMEs. Smooth cash-flow gaps. Fulfil bigger orders. Pay suppliers on time. Rates from 9.15% p.a.

Rs 25 CrMax Limit
9.15%+Interest
AnnualRenewal
Interest on UsageOnly
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What is a Working Capital Loan

Working Capital Loan Explained

A Working Capital Loan is short-term finance designed to fund the day-to-day operational cycle of your business - buying inventory, paying suppliers, meeting payroll, and bridging the gap until customers pay you. Unlike term loans that fund one-time capital investments (property, machinery, factory), working capital finances the perpetual operating cycle.

For most businesses, the working capital gap is the single biggest cash-flow constraint. You buy raw materials on Day 1, produce goods over 30 days, sell to customers on 60-day credit, and receive payment on Day 90 - meanwhile paying salaries every 30 days. This 90-day gap between spending and receiving is where working capital finance steps in.

India offers six major working capital products - each suited to a specific need. MahadevX helps you pick the right structure based on your turnover cycle, industry (manufacturing vs services vs trading), and existing banking relationships. The right working capital product can double your effective operating capacity without needing fresh equity investment.

Types of Working Capital

6 Types of Working Capital Finance in India

Overdraft (OD)

Draw from a pre-approved limit. Pay interest only on utilised amount. Renewable annually. Flexible.

Cash Credit (CC)

Inventory + receivables-backed limit. Drawing power monitored monthly. Most common MSME product.

WCTL

Working Capital Term Loan - fixed 12-36 month structured facility. Amortises like a term loan.

Invoice Financing

Advance 70%-90% of unpaid invoices. Buyer pays lender directly. Fast liquidity.

Bill Discounting

LC-backed short-term credit. Lower rates than invoice financing. Requires buyer acceptance.

Packing Credit

Pre-shipment finance for exporters. Backed by confirmed export orders. Preferential PSU rates.

Key Features

Why Choose Working Capital Finance

Pay Only on Usage

For OD/CC - interest is charged only on the amount you draw, not the full limit.

Revolving Facility

Withdraw, repay, withdraw again - no re-application needed within the 12-month term.

Annual Renewal

Limit reviewed annually. Growing businesses often get limit increases at renewal.

Nil Prepayment

No prepayment charges on WC - repay whenever cash is available.

CGTMSE Covered

MSME WC loans up to Rs 5 crore covered by government guarantee - no collateral needed.

Priority Sector Rates

MSME working capital gets one of the lowest business loan rates in India - starting 9.15%.

Grows With You

As your turnover grows, WC limits scale up - unlike fixed term loans.

Same-Day OD Against FD

Instant OD against your FD at 1%-2% above FD rate. No CIBIL check. Same-day approval.

Eligibility

Working Capital Loan Eligibility

Business Vintage

Most banks: 2-3 years. NBFCs: 1 year. New businesses: OD Against FD is the alternative.

Annual Turnover

Rs 40 lakh+ for private-bank OD. Rs 20 lakh+ for NBFC OD. No floor for OD Against FD.

CIBIL Score

700+ preferred. 650+ acceptable with GST. Below 650: OD Against FD or CGTMSE-backed CC.

Banking Behaviour

12+ months of clean current-account statements. No cheque bounces. Regular business turnover.

GST Registration

Essential for CC, WCTL and invoice financing. GST returns are the primary underwriting document.

Udyam Registration

Recommended for MSMEs - unlocks priority-sector rates and CGTMSE coverage.

Documents

Documents Required

KYC + Business Registration
PAN + Aadhaar of proprietor/partners/directors. Business PAN. Udyam Registration Certificate. GST Registration. Shop & Establishment Act License. Constitution documents (partnership deed / MOA / AOA).
Financial Documents
12-24 months primary current-account bank statements. 2-3 years ITR with computation. Audited financials (P&L + Balance Sheet) - mandatory for partnerships / companies. 12 months GST returns.
For CC / WCTL Specifically
Stock statement (monthly). Debtor ageing statement. Sales order book. Purchase order details. Details of existing WC limits (if any) from other banks.
For Invoice Financing / Bill Discounting
List of buyers (with credit rating if possible). Sample invoices for last 6 months. Buyer confirmation letter (for bill discounting). Existing accounts receivable ageing.
For Packing Credit (Exporters)
IEC (Import-Export Code) certificate. Export order copy or confirmed LC. Foreign buyer details. Past export history and DGFT records.
Top Lenders

Best Lenders for Working Capital Loans

State Bank of India
One of India’s largest working capital lenders. Best CC product for MSMEs. Preferential CGTMSE-covered limits up to Rs 5 crore.
Rate9.15% - 15.65%
MaxRs 25 Cr
HDFC Bank
Fastest private-bank OD approvals. Excellent for GST-registered MSMEs with clean banking. Digital limit approval.
Rate10.75% - 22.50%
MaxRs 50 Lakh
Axis Bank
Strong working capital product depth. WCTL and invoice financing well-developed. Preferred for mid-market MSMEs.
Rate10.75% - 22.00%
MaxRs 75 Lakh
Kotak Mahindra Bank
Best OD product for high-net-worth business current-account holders. Fast, flexible, minimal paperwork.
Rate11.00% - 22.50%
MaxRs 1 Cr
IDFC First Bank
Excellent supply-chain finance and WCTL. CGTMSE-backed WC up to Rs 1 crore. Digital verification.
Rate11.25% - 22.00%
MaxRs 1 Cr
Bajaj Finance
NBFC unsecured OD. GST-based approval in 48 hours. Preferred for GST-registered MSMEs without banking history.
Rate13.00% - 24.00%
MaxRs 55 Lakh
Interest Rates

Working Capital Loan Interest Rates (August 2026)

ProductInterest Rate (p.a.)Best ForTypical Limit
OD Against FDFD Rate + 1% - 2%Instant liquidity85%-90% of FD
Cash Credit (CGTMSE)9.15% - 13.50%Inventory-heavy MSMEsUp to Rs 5 Cr
Cash Credit (Non-CGTMSE)9.15% - 15.90%Larger businessesUp to Rs 25 Cr
WCTL10.75% - 18.00%Structured WC needsRs 25 Lakh - Rs 5 Cr
Overdraft (Unsecured NBFC)12.00% - 24.00%Fast, digitalRs 10 Lakh - Rs 75 Lakh
Invoice Financing12.00% - 22.00%B2B with credit terms70%-90% of invoice
Packing CreditPreferential (~1% below CC)ExportersBased on order value
Application Process

How to Apply for a Working Capital Loan

1

Assess WC Need

Calculate your working capital gap. Our RM helps.

2

Choose Product

OD / CC / WCTL / Invoice - based on need.

3

Submit Documents

Digital upload. Stock statement if CC.

4

Stock Audit (if CC)

Lender visits for inventory verification.

5

Sanction

Limit approved. Sign documents.

6

Facility Activation

Draw as needed. Interest on usage.

Pros & Cons

Is Working Capital Loan Right for You?

Advantages

  • Pay interest only on usage (OD/CC)
  • Revolving - draw as needed
  • Solves genuine cash-flow gaps
  • CGTMSE covers up to Rs 5 crore
  • Grows with your business
  • No prepayment charges
  • Tax-deductible interest
  • Same-day OD Against FD available

Trade-offs

  • CC needs monthly stock statements
  • Annual renewal - could be denied
  • Stock audits can be intrusive
  • Rates higher than pure term loans
  • Requires clean banking (12+ months)
  • Non-renewal means immediate repayment
Comparison

OD vs Cash Credit vs WCTL - Which is Best?

FeatureOverdraft (OD)Cash Credit (CC)WCTL
Repayment TypeRevolvingRevolvingFixed EMI
Interest OnUtilised amountUtilised amountOutstanding principal
Tenure12 months (renewable)12 months (renewable)12-36 months
CollateralOptional / FD / propertyInventory + receivablesProperty or CGTMSE
Stock StatementNot requiredMonthly requiredOptional
Interest Rate11%-24%9.15%-16%10.75%-18%
Best ForProfessionals + servicesManufacturing + tradingStructured WC needs
Approval Speed5-7 days10-20 days7-14 days
20 Questions

Working Capital Loan - Frequently Asked Questions

What is a Working Capital Loan?
A Working Capital Loan is short-term credit to fund day-to-day business operations - purchasing inventory, paying suppliers, meeting payroll, and bridging the gap between when you spend and when your customers pay. Unlike term loans that fund capex, working capital funds the operational cycle.
What are the types of Working Capital Loans in India?
Six main types: (1) Overdraft (OD) - draw from a limit, pay interest on usage. (2) Cash Credit (CC) - inventory/receivable-backed limit. (3) Working Capital Term Loan (WCTL) - fixed-tenure funding. (4) Invoice Financing - advance against invoices. (5) Bill Discounting - LC-backed short-term credit. (6) Packing Credit - for exporters, pre-shipment finance.
What is the difference between Cash Credit and Overdraft?
Cash Credit (CC) is a working capital limit backed by hypothecation of inventory and book debts - lender monitors the stock/receivables. Overdraft (OD) is more flexible - typically unsecured or backed by FD/property, drawable up to a limit without inventory pledging. CC is common for MSMEs; OD for professionals and current-account holders.
What is the maximum Working Capital Loan amount?
Typically 20-40% of your annual turnover for unsecured OD. For CC/WCTL backed by inventory + debtors: up to 75% of drawing power (calculated on inventory margin + debtor discount). PSU banks fund up to Rs 25 crore for large MSMEs. NBFCs fund up to Rs 5 crore for mid-market.
What is drawing power in a working capital loan?
Drawing Power (DP) is the maximum you can draw from a CC/OD limit at any point, calculated as: (Inventory x margin) + (Book debts less than 90 days x margin) - creditors. The lender restricts drawdowns to DP - so as your stock/debtors change, your available limit changes.
What is the interest rate on a Working Capital Loan?
PSU banks: 9.15% - 15.90%. Private banks: 10.75% - 22.75%. NBFCs: 12% - 24%. Secured (CC / OD Against FD): significantly lower than unsecured. Rate is charged only on the utilised amount for CC/OD facilities.
How long is the tenure for a Working Capital Loan?
CC and OD limits are 12-month facilities, renewable annually with limit review. WCTL: 12-36 months typically. Invoice financing and bill discounting: 60-180 days per invoice. Packing credit: 180 days.
Do I need collateral for a Working Capital Loan?
CC is backed by inventory + receivables hypothecation (technically collateral but the working capital itself). Small OD limits (up to Rs 25 lakh) can be unsecured. Larger OD needs FD, LAP or personal guarantee. NBFC unsecured OD available for GST-registered MSMEs.
What is packing credit for exporters?
Packing Credit is pre-shipment working capital finance for exporters against confirmed export orders or LCs. Enables purchase of raw materials, processing and packaging before shipment. Repaid via export proceeds. Special preferential rates from PSU banks and Exim Bank.
What documents are needed for a Working Capital Loan?
PAN + Aadhaar KYC, GST registration, Udyam registration, 12-24 months bank statements, 2 years ITR + audited financials, business address proof, constitution documents, inventory/debtor statements (for CC), sales orders (for packing credit), invoices (for invoice financing).
What is the difference between Working Capital Loan and Term Loan?
Working capital funds operating cycle (inventory, receivables, payroll) - short tenure, revolving. Term loan funds capex (property, machinery, expansion) - fixed tenure, EMI-based. Working capital limits are renewed annually; term loans amortise over 12-84+ months.
How is invoice financing different from bill discounting?
Invoice financing: lender advances 70%-90% of your unpaid invoice; buyer pays lender directly on due date. Bill discounting: uses a formal Bill of Exchange (with buyer acceptance) under Negotiable Instruments Act - lower rates but requires buyer counter-signature.
Can I get a Working Capital Loan without GST?
For small OD limits (up to Rs 25 lakh) from some NBFCs - yes. For CC or larger WC limits - GST is essentially mandatory. GST returns are the primary evidence of turnover for bank underwriting.
What is the working capital cycle?
The number of days from spending money (buying raw material) to receiving money (customer paying). Formula: Inventory Days + Receivables Days - Payable Days. A 60-day cycle means Rs 60 lakh is locked in operations for every Rs 1 crore of monthly sales. Working capital finance covers this gap.
Can I get a working capital limit against my Fixed Deposit?
Yes - OD Against FD is one of the fastest working capital products. You get 85%-90% of FD value as OD, at 1%-2% above the FD interest rate. FD keeps earning interest. Approval same-day. No CIBIL check needed.
What happens if I do not renew my Working Capital limit?
Non-renewal means the limit lapses and you must repay the outstanding immediately. Lenders usually initiate renewal discussion 60-90 days before expiry. Renewal typically requires updated financials, banking behaviour review, and sometimes limit revision (up or down).
Is Working Capital Loan interest tax-deductible?
Yes - fully deductible as business expense under Section 37(1). This is different from personal loans where interest is not deductible. Keep interest certificates from the lender for CA filing.
What is the CGTMSE coverage for Working Capital Loans?
CGTMSE covers working capital loans up to Rs 5 crore for MSMEs - fund-based (CC, WCTL) and non-fund-based (LC, BG). Annual guarantee fee: 0.75%-2.0%. Enables collateral-free working capital for eligible MSMEs.
Which bank offers the best Working Capital Loan for MSMEs?
SBI (CC) for large limits + CGTMSE. HDFC and Axis for fast unsecured OD. Kotak for high-net-worth current-account customers. Bajaj Finance and IDFC First for flexible NBFC OD. Best choice depends on your turnover, industry and banking relationship.
How can MahadevX help with Working Capital Loan?
MahadevX matches your business profile - turnover, industry, existing banking - to the best-fit working capital lender across our 100+ partners. We handle the paperwork, coordinate valuations (for CC), and negotiate limit sizing. Zero fee to you.
Related

Related Loan Types

Overdraft Facility MSME Loan CGTMSE Loan Term Loan Unsecured Business Loan Secured Business Loan
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