Working Capital FinanceWorking Capital FinancePlans and policiesPlans and policies

Presented by:

Jainendra singhal(16)

Shilpi raj kasodhan(45)

Ankit gupta(06)

Sameeha parvez(41)

Ankit singh(07)

‘Working capital is life blood of every business”

• Working capital is short term finance that business keeps.

• “Working capital is the money used to pay for the everyday trading activities carried out by the business-stationary needs,staff salaries and wages,rent,energy bills,payments and so on”

• Working capital is defined as:

working capital =

current assets – current liabilities

Current assets

These are short term sources of finance such as stocks, debtors and cash – the amount of cash and cash equivalents –the business has at any time. Cash is cash in hand and deposits payable on demand (e.g. current accounts). Cash equivalents are short term and highly liquid investments which are easily convertible into cash.

Current liabilities

These are short term requirements for cash including trade creditors ,tax owing- the amount of the business owes to other people/groups/business at any one time that needs to be repaid within the next month or so. (within an accounting year)

•It is an operating liquidity available to a business.

•Along with fixed assets such as plant and equipment,working capital is considered

a part of operating capital.

Types of working capital:

Gross working capital :

It refers to the firms investment in total current assts of the enterprise

Net working capital :

It refers to the difference between the current assets and current liabilities.

Two most significant sources of finance for using working capital:

Trade credit

&

Bank credit

Management will use a combination of policies and techniques for the management

of “working capital.’

These policies aim at managing the current asset (generally cash and cash equivalent,inventories and debtors) and the short term financing,such that cash flows and returns are acceptable.

•Cash management; identify the cash balance which allows for the business to meet day to day expences,such that cash flows and returns are acceptable

•Inventory management. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials –and minimizes reducing costs – and hence increases cash flow.

Conti………..

Debtors management. Identify the appropriate credit policy,i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital.

Short term financing. Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan, or to “convert debtors to cash” through “factoring”.

The measures are set out below:

1. Lending norms of working capitalreatment

2. Treatment of term loan instalments for assestment of working

Capital purposes.

3. Export credit

4. Withdrawl of maximum permissible bank finance.

RBI guidelines regarding working capital

RBI has been issuing guidelines and directives to the banking sector toward this end.

Implemented by RBI in mid 1960s in order to

•Measure of discipline among industrial borrowers.

•Redirect creditto the priorityt sector of the economy

concepts:

Corporate finance is an area of finance dealing with financial decisions business enterprises

Goal of corporate finance is to maximize corporate value while managing the firms financial risks.

It is a matter related to investment banking.

Bank of Baroda offers corporations Working Capital Finance to meet their operating expenses, purchasing inventory, receivables financing, either by direct funding or by issuing letter of credit.

BANK OF BARODA

Funded facilities, i.e. the bank provides funding and assistance to actally purchase business assets or to meet business expenses.

Non-Funded facilities, i.e. the bank can issue letters of credit or can give a guarantee on behalf of the customer to the suppliers, Government Departments for the procurement of goods and services on credit.

Available in both Indian as well as Foreign currency.

Key Benefits Of Bank Of Baroda

We provide customers with: Limits offered : Rs. 25 lacs to Rs. 5 crores

Collaterals : Funding against commercial / industrial / residential property & liquid securities.

Facilities offered : Cash Credit / Overdraft Bank Guarantee / Letter of Credit / Export Credit

ICICI

ICICI

Management Services - Fast processing and quick availability of loans with lesser documents. Best suited for : Retailers / Traders / Manufacturers / Wholesalers / Distributors / Importers / Exporters / Dealers Pre-requisites : Minimum one year business vintage & audited financials.

E-mail, Mobile alerts. - Internet banking convenience - 8am to 8pm banking in select locations

Working capital limits to support your growth plans and enhancements based on your further requirements - ranging from 25 lacs to 5 crores.

ICICI

No requirement of collateral security. Available in two attractive variants

i. Cash Credit Working capital as cash-credit facility (with

charge on current assets) Facility for a period of 12 months Floating interest rate. Interest levied only on

amount utilized. Flexibility of paying a minimum amount every

month. ii. Business Installment Loan Term loan with equated monthly installments

(with charge on current assets / fixed assets financed through Business Installment Loan

Choice of fixed tenure for repayment (6 months to 48 months)

Loan for purchase of assets / expansion / working capital

Fixed rate of interest.Working capital as cash-credit facility (with charge on current assets)

ICICI

ICICI

Interest rates on loans and advances are IBAR (ICICI Bank Benchmark Advance Rate) linked. Present Interest rate is I BAR + 3% based on product offered.

I-BAR is 15.75% p.a. payable monthly with effect from June 05,2009.

SBI OFFERS WORKING CAPITAL FINANCE TO MEET THE ENTIRE RANGE OF SHORT

TERM REQUIREMENT THAT ARISE WITH IN A CORPORATE’S DAY TO DAY CYCLE.

HELPS IN:- 1).FINANCING INVENTORIES

2).MANAGING INTERNAL CASH FLOWS.3).FUNDING PROTECTION.

4).MARKETING OPERATION.5).CASH SUPPORT TO MARKET EXPANSION

Working Capital Finance

SBI is a one shop providing financial

products/services of a wide range for large, medium and small

customers both domestic and international.

Corporate Banking

Schemes of SBI

1). Project Finance :- SBI has formed a dedicated

Project Finance Strategic Business Unit to assess credit proposals from and extend term loans for large industrial and infrastructure projects.

It Covers:- Greenfield Industrial Projects. Capacity expansion at existing

manufacturing units. Business expansion planning and

diversification, replacement of equipment.

Corporate Term Loan

SBI corporate term loan can support your company in funding ongoing business expansion, repaying high cost debt , technology up gradation, R&D expenditure etc.

Available for tenure from 3 to 5 years.

Dealer Financing

SBI extends financial support to the corporate distribution networks by providing both working capital finance and term loans to selected dealers of identified companies . This gives dealers to leverage their business relationship with major corporates to avail low cost credit. So this type of financial solutions allow the corporate negotiate a better price with dealers.

Other Schemes:-

Structured Finance .Deferred Payment Guarantee.

Conclusion:-SBI has the world’s largestbanking Network of over 9000branches and this enables todeliver the financial solution atyour suppliers doorsteps acrossthe span of the country.