For a trading unit, mainly dealers, the main business is to buy ready made stock and sell it at a margin. They mainly buy by giving upfront payment and giving credit to retailers. For manufacturer, business consists of converting the raw material into finished goods by adding value. For smaller manufacturers, it is difficult situation. Suppliers don't tend to give credit and customers don't give advance. As the production increases, their money gets stuck in the business. As the business needs money to sustain itself, the cash flow is extremely important. Fast Growth can also be one of the reason why cash gets stuck and the cycle stops.
When we take a loan, the thumb rule is 20 %, i.e. you should have an annual turnover of 5 times your CC loan account. If your company has increased the turnover, you can approach your bank to increase the CC limit. You can also approach them to take a Temporary Overdraft facility which you can get once in a month. This is a sort of bridge loan and you can get it for one month. It depends on your bank whether they renew it for the next month. If your requirement has increased, then it is better that you approach for increase in CC limit only.
In case there are problems due to the profitability and other balance sheet issues, then you can approach other banks. There are banks which will consider giving you loan despite your low profitability just because your turnover has gone up and you have hope to bring the business back on line with increasing the business. One of those NBFCs is Tata Capital Finance. Of course, this will again depend on case to case, but you will have hope if you can contact them. The loan though might be at a higher cost, as the risk is high.
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