The Working Capital Demand Loan (WCDL) is used to address short-term working capital needs. It 
must stay within the working capital constraints that have been established. It could be possible to 
use it as a sub-limit of the financed working capital limit. The loan might last up to 12 months.

What is long-term working capital, and how does it differ from short-term working capital? A loan 
having a tenure of more than 84 months is known as long-term working capital. When compared to 
short-term loans, it has lower interest rates. It has a longer payback period, allowing a company to 
align its borrowings with its long-term goals.

The repayment is perhaps the most significant distinction between a line of credit and a working 
capital demand loan. The loan has a set payback deadline, generally 90 or 180 days. This type of 
rapid business loan will also come with a higher interest rate. 

Working Capital is made up of four main components.
• Trade Receivables. It is also known as account receivables and is represented as current 
liabilities in balance sheet.
• Inventory.
• Cash and Bank Balances.
• Trade Payables.

Cash Credit (CC) is a type of short-term financing available to businesses and organisations. Financial 
credits, also known as working capital loans, are used to meet an organization's immediate cash 
needs or to acquire current assets. Cash credit is a loan, and banks typically need collateral before 
approving it.

The bank provides cash credit loans to help businesses meet their working capital needs. These are 
secured loans backed by the hypothecation of various assets owned by the company. Borrowers can 
set up a running account and utilise the borrowed monies as they see fit.

When a company's current obligations exceed its current assets, it has negative working capital. 
Lenders and creditors may be concerned about this position since the company may not have 
enough liquid assets to meet its short-term obligations.

Working Capital Affecting Factors:
• Length of Operating Cycle: The amount of working capital directly depends upon the length 
of operating cycle. 
• Nature of Business
• Scale of Operation
• Business Cycle Fluctuation
• Seasonal Factors
• Technology and Production Cycle
• Credit Allowed
• Credit Avail 

Working capital is a daily requirement for businesses since they require a consistent quantity of cash 
to make normal payments, cover unforeseen expenditures, and acquire basic ingredients for 
manufacturing items.

When you don't have enough money in your account to cover a transaction, but the bank 
nonetheless pays it, you have an overdraft.

4 Tips for Effective Working Capital Management
• Inventory should be reduced and inventory turnover should be increased.
• Pay vendors on time and effectively manage debts.
• Convert payables and receivables to electronic.
• Obtain sufficient funds.
• With well-managed working cash, you may expand your firm.

Working Capital Improvement Techniques
• Shorten Operating Cycles. An increased cash flow generates working capital. 
• Avoid Financing Fixed Assets with Working Capital. 
• Perform Credit Checks on New Customers. 
• Utilize Trade Credit Insurance. 
• Cut Unnecessary Expenses. 
• Reduce Bad Debt. 
• Find Additional Bank Finance. 

Working Capital = Current Assets - Current Liabilities is the formula for calculating working capital. 
For example, if a company's total current assets are 300,000 and its total current liabilities are 
200,000, the company's working capital is 100,000. (assets - liabilities)