What is a Working Capital Loan?
Working capital loans are loans that have relatively short payment periods and the loans are usually for smaller amounts of money. These loans are meant to help businesses with their day-to-day needs and operation costs.
These loans are most effective when they are used for things like meeting payroll or purchasing inventory and supplies for their business. Some businesses run on seasonal cycles can benefit from these loans to ensure that they can keep up with operational expenses throughout the year.
Your company’s working capital is the difference between what your company owns and what your company owes in current debts. The difference between those numbers is your working capital. Businesses that don’t have enough working capital on hand can get short-term working capital loans to help cover immediate expenses.
Many businesses are challenged with creating enough working capital just as they start a new business. This is even more challenging for businesses that are seasonal. It can require creativity in order to come up with the working capital in order to make a business work and be able to pay a business’s expenses on a regular basis.
The Following are Some Types of Capital Loans That Are Available:
- Short-Term Loans: Business capital in terms of short-term business loans is the most common type of working capital that a business can get. Generally, the payback terms of these loans are 3 to 18 months.
- Lines of Credit: Working capital lines of credit will give you access to another line of credit to help your business have funds available as they are needed. You will just have to pay the interest on the funds that you are using. Many businesses will use this as an emergency fund if their company falls short of cash.
- Merchant Cash Advances: Cash advances are a great option for companies who need a sum of cash to pay something off for their business. You will pay the loans back by allowing the loaning company to take a certain percentage of your daily credit card sales as repayment.
- Invoice Financing:These financing options help you collect money from unpaid invoices to help your company pay its expenses on time. Invoice financing allows you to free up other cash to use for other business expenses.
- SBA Loans: SBA loans are for small businesses and are usually offered a low interest rate. These loans are usually available in amounts up to $5 million.
If any of these types of financing will help your small business, please feel free to contact us for further information. We are happy to help and are here to assist you in getting the financing you need for your business.