Working Capital Limit

Working Capital Limit (WCL) is a short-term credit facility provided by banks and financial institutions to help businesses meet their routine operational expenses such as procurement of raw materials, payment of salaries and wages, utility bills, inventory management, and other overhead costs. Unlike a term loan, which is used for long-term investments, the working capital limit functions as a revolving credit facility. This means businesses can withdraw funds as per their requirement within the sanctioned limit and repay them as cash flows improve. Interest is charged only on the amount utilized, making it a cost-effective financing option for managing day-to-day liquidity.

The facility is usually sanctioned based on the company’s turnover, financial health, and creditworthiness, and it may be secured against current assets like stock, receivables, or other collateral. In some cases, collateral-free working capital limits are also available under specific government schemes. By ensuring timely access to funds, WCL helps enterprises manage seasonal demand, fulfill bulk orders, maintain smooth operations, and focus on growth without facing cash flow disruptions. It serves as a financial cushion that supports both stability and competitiveness in the business environment.