What is a Working Capital Loan?
Working Capital is the life blood of all small businesses. It’s the cash available to cover daily operating business expenses. It’s basically a measure of a company’s liquidity, overall health and short-term financial efficiency. Cash flow is vital to cover short term inventory purchases, payroll, and any other operational expenses that occur daily.
Net working capital for a company is calculated as current assets minus current liabilities. Getting a working loan from a traditional lender is challenging because they typically demand an extensive guarantee or collateral for the money lent. Further, it is generally known for traditional lenders to demand business owner’s property or other highly valuable collateral in order to approve working capital loans.
Getting a working capital loan from online lenders allows business owners the flexibility to carry on their daily operations regardless of failure to pay for ongoing operating expenses. This way, they can produce more revenue based on existing capital and pay for the loan easily.
Types of Working Capital Loans
Listed here are some of the most common types of working capital loans:
The benefit of bank overdraft facility or credit line is that you only pay interest on the amount overdrawn – which is typically 1% to 2% above the bank prime rate.
These loans have a fixed rate of interest and payment period. These short term loans are typically secured and have a repayment period of 12 months. With a good credit history and a working relationship with the lender, you can easily get a short term loan without collateral.
These types of working capital loans can be obtained from personal resources, like investments from loved ones and home equity loans. These loans are best suited for startups and businesses with little or no credit history.
These types of working capital loans are based on the confirmed sales order value of your company. If you don’t have a track record for paying debts, getting these types of loans can be challenging.
These loans are similar to accounts receivable loans, with the only difference being that the value of these loans is based on future credit card receipts. Factoring or advances are most suitable for businesses that accept credit cards as a mode of payment.
These loans are provided by current or potential suppliers. They also offer a trade credit facility if you place large orders from them. Before approving such loans, trade creditors usually do a careful analysis of your company’s credit history.
Small Business Working Capital Loans
In order to successfully lead in today's fast paced global economy, small business owners use their accessible cash to reinvest in their daily business operations. With a working capital loan from Merchant Advisors, now you can do even more with the extra cash.
Our working capital loans can be used for the following:
- Increase your business operations,
- Investing in advertising,
- Make business expansion,
- Make tax payments,
- Improving your current business,
- Pay for payroll & outstanding debt
Merchant Advisors can get your business working capital from $5,000 to $500,000 quickly and with a little paperwork. Learn how a working capital loan is the perfect funding solution for all your small business financing needs.
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