Working Capital Loans

Funding Up

To $5 million

Ready to grow your business?

See how much you qualify for:
Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?

Intro to Working Capital Loans

The majority of small business owners will need additional working capital, no matter how healthy their finances are. Unexpected circumstances may cause revenue or the funding of operations to be compromised. Examples of this include bad weather, changes to demand or even a business fire next door. Working capital loans became popular because of the certainty of such events. Working capital loans are designed to assist businesses in recovering from temporary cash flow problems and taking advantage of new opportunities.

If you need money, but not a large amount of it, working capital loans may be just what you need.

What are Working Capital Loans

Working capital is important to understand before diving into the explanation of loans.

The money required to cover your daily operating costs is called working capital. Working capital is used to cover expenses such as rent and payroll. This is the cost of running your business on a daily basis.

Working capital loans provide businesses with the money they need to cover their ongoing operational costs. Working capital loans can take many forms. They include a short-term loan for working capital, a merchant cash advance from credit card sales, contract factoring (on unpaid bills due), SBA loan or business line of credits.

Working capital loans are also known as cash flow loan or operating capital loans.

Working Capital for Your Business Cash Flow

In a perfect business world, working capital is the cash that flows into your company due to sales of your product or service. Not all businesses enjoy a constant cash flow. You may be just starting your business and gradually increasing your client base. You might run a seasonal business. You might not have as much in your bank account during the off-season. Working capital is needed to pay your monthly bills, whether or not business is booming.

If your business is lacking in working capital, then you will need to find another source of cash. A working capital loan can be a solution.

Unsecured Working Capital Loans - Research, Facts & Reports

According to the Voice of Small Business in America 2019, Insights Report the most common way small businesses use new funding is to improve their cash flow. 54% of respondents said they borrowed money to smooth out their cash flow or to apply to working capital.

According to the Fed’s Small Business Credit Survey, the market for small business loans is estimated at $1.4 trillion.

The Small Business Credit Survey found in 2019 that applicants with medium and high credit risk seeking financing or working capital lines of credit were almost as likely as those who wanted to submit an application to a large traditional bank to complete a loan application (54% and 50%). Only 41% of respondents were likely to seek credit from a small-bank.

In 2019, the SBA approved 100,495 loans totaling $32.7 Billion. SBA offers working capital loans, some of which are tied to property.

How do Working Capital Loans Work?

How does a working-capital loan work? Working capital loans are available in many different forms, and can be obtained from online lenders as well as traditional financial institutions like the Small Business Administration in some limited cases. However, they all share certain characteristics. Small business owners with poor credit scores can still access the best working capital loan. There is no need for collateral or a guarantee. These loose requirements and shorter terms tend to increase interest rates.

Online lenders are more likely to offer working capital funding than traditional financial institutions. Companies don’t need to specify the purpose of the funds. They will recommend repayment terms that are most appropriate for your cash flow, and to solve the problem. Some alternative lending, like Kabbage Funding, offer multiple funding products. A business line of credit, for example, might be the best option for a highly seasonal business that needs to cover expenses on a day-to-day basis during slow seasons. Merchant cash advance suppliers may think the product is best for companies that are looking to bridge a shorter gap in their cash flow. Standard short-term loan terms are as low as four or five months. Some types of working capital loan can be as long as several years.

It’s not just your monthly expenses that determine your borrowing amount. Your business’s short-term and current liabilities (loans payable, taxes etc.) must also be included. The borrowed amount must be greater than your short-term liabilities to run your business.

What are the Advantages of Working Capital Loans?

Working capital loans can be approved within 24 hours. There is no need for a high credit rating or collateral.

Working capital finance was designed to help businesses deal with unexpected circumstances. The application process for products with long terms, high borrowing limits and low rates is usually lengthy. Businesses must also determine how much money they require. Most small business owners, on the other hand, are looking for working capital loans to cover their short-term liabilities and operational costs. The application process is much faster when a business owner has calculated their desired funding amount.

The availability of different repayment structures is another advantage. You can select the repayment structure most suitable for your situation with the help of a small-business lender. Working capital loans can be used for a variety of purposes, including to pay off short-term debts and fill in cash gaps. However, they can also be used by small businesses to invest in growth, such as ordering inventory or undertaking a large, expensive project.

Other types of small-business loans don’t offer as much flexibility. They can only be used for certain purposes by business owners. You wouldn’t, for example, take out a SBA loan or term loan to cover operating expenses.

What are the Disadvantages to Working Capital Loans?

Loose conditions increase the risk for alternative lending. This means that business owners who have poor credit, are experiencing cash flow issues, or have been in business for less than a year will be less likely to pay back the loan on schedule. Online lenders mitigate this risk by imposing higher interest rates and shortening the terms. If your business’s cash flow does not improve, a high interest rate can be a threat. Working capital loans are only appropriate for temporary issues.

Working capital loans are also typically offered at lower amounts of borrowing than SBA loans and business term loans. Working capital loans are not suitable for costly initiatives such as developing a product, renovating a physical space, or adding a division. Working capital loans are best used for short-term requirements, not long-term investments which may take many years to yield results.


How to Apply for Working Capital Loans

Different types of loans may have a slightly different application process. All variations are very simple and require little paperwork. You can be funded within a few days. How to start:

Your Working Capital Loan Gets Set Up – Now What?

It’s not just about getting financing for your company. This is a great opportunity to build (or improve) your credit.

If you get a business credit line or another form of credit, keep your balance below the limit. Keep your credit card balances below the limit if you have a business line of credit or any other form of rotating credit, such as business credit cards.

Your credit score will improve if you consistently pay your business financing on time. This will give you access to better rates and terms the next time you need business funding.

What if I am declined for a working capital loan?

In this case, we might recommend alternative tools for financing your business. For example, a business credit card or a personal loan. In this situation, we may recommend other tools to finance your business, such as a business card, or even a personal loan. These two financing options are easier to qualify than traditional small business loans.

Consider credit unions as a source of working capital. Credit unions offer excellent terms, and they are easier to qualify for if you’re a member. If you qualify, credit unions may be the best option for you.

We may also recommend services to repair your credit. These services focus on boosting your credit score by identifying the problems that are affecting it and eliminating them. You will pay lower interest rates on all financing types if you fix your credit.


What Business Owners Like You Are Saying

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Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?