Growth Can Consume Cash Before It Creates Profit.
A business can be profitable and still face liquidity pressure — inventory has to be purchased before it’s sold, and credit is extended to customers before collections arrive. EquiFin helps businesses structure working capital facilities around their actual operating cycle, across receivables, inventory, payables and banking limits.
Cash Credit & Drawing Power · Limit Enhancement · Consortium Banking
Where This Becomes Relevant
Working capital pressure usually shows up at predictable moments:
- Sales Growth Outpaces Cash — higher production needs more inventory and receivables before collections catch up.
- Receivable Days Are Extending — longer customer credit, institutional payment cycles or certification delays lock up cash.
- Seasonal Peak Requirements — pre-season build-up or festival-led demand that average-utilisation limits don’t cover.
- Fund-Based Limits Stay Fully Utilised — a sign the operating cycle has outgrown the existing facility.
- LC/BG or Multi-Bank Friction — non-fund limits constraining growth, or coordination problems across banking relationships.
What Banks Actually Evaluate
Banks don’t just look at revenue and profit. They test whether the operating cycle actually supports the facility:
- Current Ratio — short-term asset coverage against current obligations.
- Inventory & Debtor Ageing — whether stock is moving and receivables are actually collectible.
- GST vs Banking Turnover — reconciling reported activity with actual banking transactions.
- CMA Data & Projections — whether sales assumptions are backed by credible inventory and receivable assumptions.
- TOL/ATNW — overall leverage relative to the company’s tangible net worth.
- Banking Conduct — utilisation pattern, stock-statement discipline and covenant compliance.
How the Financing Is Approached
The cash conversion cycle — Inventory Days + Receivable Days − Payable Days — is what actually drives the requirement, not a target facility size. A sanctioned limit also isn’t the same as available liquidity: Drawing Power depends on eligible current assets after lender margins, so a company can sit on a large sanctioned Cash Credit line and still be cash-constrained if receivables age or stock statements lag. We size the requirement off the operating cycle first, then decide whether the real gap is a limit shortage, a Drawing Power problem, or an inefficient mix between fund-based and non-fund-based facilities — because more debt doesn’t fix overdue receivables or obsolete inventory.
Matching Facility to Requirement
| Business Requirement | Potential Facility Focus |
|---|---|
| Day-to-day liquidity | Cash Credit / Overdraft |
| Structured short-term borrowing | WCDL |
| Domestic / import procurement | Inland or Import LC |
| Contract or financial obligations | Performance / Financial BG |
| Seasonal inventory build-up | Enhanced / seasonal working capital |
| Multiple bank exposure | Consortium / multi-banking coordination |
Indicative — the appropriate structure depends on the operating cycle, existing banking arrangements and independent lender evaluation.
What EquiFin Does
Operating-Cycle Diagnosis — finding where capital is actually getting locked, before proposing a facility.
Facility Mix Review — CC, OD, WCDL, LC and BG balanced against actual operating requirements.
Limit Enhancement Case-Building — a requirement backed by operating evidence, not just a bigger ask.
Consortium & Multi-Bank Coordination — security, covenants and documentation aligned across lenders.
Execution Through Sanction — CMA preparation, lender discussions and documentation through to disbursement.
Why EquiFin
- We look at Drawing Power, not just the sanctioned limit.
- We’ll tell you when the answer isn’t more debt.
- We build the CMA case around actual operating evidence.
- One point of contact across multi-bank coordination.
Frequently Asked Questions
What is working capital finance?
Working capital finance refers to banking facilities used to support the day-to-day operating cycle of a business. Depending on the business requirement, this can include Cash Credit, Overdraft, Working Capital Demand Loans, Letters of Credit and Bank Guarantees.
What is Drawing Power?
Drawing Power refers to the amount currently available for utilisation under a working capital facility based on eligible current assets and applicable lender margins or exclusions. It can be lower than the total sanctioned facility limit.
Can a profitable company still face working capital problems?
Yes. Profitability and liquidity are different. A profitable business can experience cash pressure when capital remains tied up in inventory or receivables for extended periods.
Does EquiFin provide working capital loans directly?
No. EquiFin acts as an independent financial advisory firm supporting working capital structuring, lender alignment and transaction execution. Financing decisions and terms remain subject to independent lender evaluation.
Liquidity Pressure Is Usually a Symptom. The Operating Cycle Explains the Cause.
A working capital requirement should be evaluated in the context of how cash actually moves through the business — procurement, inventory, sales and collections.
Evaluate Your Working Capital Structure