How to Calculate Working Capital Requirement for Your Business?

Calculate! Working Capital is the cash in hand needed for a business and it reflects the efficiency of the business. Working capital is decided by deducting the current liabilities of the business from its current assets.

Calculate! Assets are the one which can be converted into cash money in a year whereas Liabilities are the daily expenses that happen within the business. Working Capital Requirement varies from one business to another.

Calculate! Determination of working capital is crucial to ascertain the effectiveness and efficiency of the business.

Calculate! If the liabilities are more than the assets, then it might be negative working capital indicating that the business isn’t performing as required and it is going to be troublesome to meet the monetary needs of the company.

Whereas positive working capital means they have enough cash in hand to perform effectively and it will have a positive impact on the business.

Thus, it’s obligatory to properly evaluate the working capital need.

How To Determine Working Capital Needs?

Working capital needs are determined by various factors of which few are detailed as follows:

Business Nature

Working capital needs vary across companies because it depends upon the nature of business. Manufacturers would need high working capital to fund its procurement needs of the raw material, etc.

And so, would be the working capital need of a wholesaler as they need to stock an enormous quantity of products. To fund their capital needs, such MSME can approach financial institutions for business loans/MSME business loans.

Conjointly as MSME business loans are offered at a low MSME loan interest rate, it seems more favorable.

Also, manufacturers can apply for business loan such as Working Capital loan to fund its procurement needs.

On the other hand, the business performed online or service-based industries like a recruitment agency, etc have lower working capital needs owing to the nature and type of its business.

Operating Cycle

The operating cycle is the time required to make a product and later sell it to get revenues.

Longer the operative cycle, the business might face a financial crunch and would need additional working capital compared to the businesses with a shorter operative cycle.

Such businesses can avail of MSME business loans or working capital loans having low business loan interest rates to cover their negative working capital.

MSME loans are online business loans and also, the documents required for business loans are very basic. Moreover, it being an instant business loan it’s a relief for small businesses needing small business loans.

Business Type

Start-ups could have high working capital needs to set up their business. Start-ups can opt for new business loans/small business loans to take care of their capital needs.

And MSMEs venturing into business growth plans could have high working capital needs that can be funded by MSME loan schemes because they are online business loans, instant business loans, have low MSME loan interest rates and in addition, are unsecured business loans mean MSME loan without collateral.

To summarise, Working Capital management should be efficient for a business to be functional in the long run and for this, the business should always focus on lowering its current liabilities than its current assets.

To cover the deficit and prevent business loss from negative working capital, companies should take MSME business loans/business loans/Working capital loans as business loans provide immediate solutions to negative working capital.


1. What is MSME loan eligibility or who is eligible for MSME loan?

MSME loan eligibility is that the company should be operating the business for more than six months, the applicant’s age should be minimum of 25 years. Also, the investment in the manufacturing sector & service sector should be Rs. 10 crores or less and Rs. Crores or less respectively.

2. How to get MSME loan?

MSME business loans being online business loan can be easily applied. A company just needs to upload the application form along with documents required for business loans.

3. What are the business loan requirements?

The business loan requirements, be it a new business loan or small business loan or MSME loans are basic whereby a company needs to provide identity proof, address proof, agreement copy, business registration copy, bank statement copy, passport-sized photos, etc.

4. What is a Business loan EMI calculator?

Business loan EMI calculator is basically, a formula to know the Equated Monthly Instalments a company has to pay in the business loan/MSME loan applied.

5. How to avail of a business loan in India/business loan in Delhi?

To apply for a business loan in India or a business loan in Delhi, a company has to determine from the business loans provided by several NBFCs like Ziploan, and accordingly choose.

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