Working capital loan

With the help of a current assets financing loan, a business can to finance the costs of current assets necessary for its operation. These expenses can fluctuate significantly even in the short term.

A current assets financing credit is a loan that can be used to eligible asset or raw material costs in the short term, i.e. current assets. A living example is plant cultivation. For this activity, businesses typically think in annual cycles. Working current assets financing come in handy for farmers at the time of seed procurement. 

There are basically two types of current assets financing. The fixed-term current assets financing loan and the revolving credit. The former works like most loans. The loan applicant receives the capital in a lump sum, and must repay it together with interests and other costs within a specified period of time. The maturity of this loan is usually 2-3 years.

A revolving current assets financing facility works like an overdraft. The bank provides a credit line in addition to the invoice held with it. Our company can draw any amount from the credit limit as it pleases, and we also enjoy great freedom in regarding repayment.  In most cases, the loan can be repaid at any time within a year. With the repayment, we also refill our limit, from which we can then withdraw as much money as we need. 

By default, banks do not ask for collateral for current assets financing. However, the disbursement of the loan is usually conditional on the company's majority owners as private individuals unconditional guarantee its repayment. The guarantee can be redeemed by the guarantee undertaking of specialized organizations.