In a small business, the profits aren’t immediately realized, sometimes making it quite difficult to carry on with the daily expenses that small businesses normally experience. Working capital loan is the program that can provide you with the breakthrough that you actually need to pay all your necessary bills without having to lose a percentage of your business.
Currently there are lots of small business owners who are using cash readily available to reinvest in their daily business operations. However, with a working capital loan, you can have more cash to do even something extra.
Whether you are looking to expand or improve your current small business, or want to make an investment in the advertising, or even paying for taxes or clearing your outstanding debt, the extra cash can be the solution you are looking for. With working capital loans, you can get $5,000 to $500,000 quickly and that too with little documentation.
In recent times, regulation has made it much more difficult for many small businesses to get the working capital they need quickly from traditional lenders. However, small businesses are the lifeline of the US overall economy. To fight with this inconsistent or complicated situation in which almost all small businesses find themselves, working capital loans are the best answer.
Capital For Daily Business Requirements
The working capital can take in almost every aspect of your finances, however in the end you need it to keep your small business running. That could consist of managing the cyclical plunges in the revenue, covering the maintenance costs, keeping your payroll up-to-date or managing your inventory.
In general, working capital loans for small businesses are intended to finance a business’ daily operations. There are many types of working capital loans that generally have a shorter term, which means you need to pay them back quickly, usually less than a year. Working capital loans are meant to fulfill immediate requirements rather than fund the long-term objectives, such as major equipment purchase or expansion at a larger scale.
Evaluating Your working Capital Options
Asking some of the major questions can lead you to the working capital loan that will be most suitable to your small business. Here are a couple of questions to consider as you are researching different lenders:
- What type of annual percentage rate and other charges does the lender charge?
- What are the available repayment terms?
- Where you will use this loan?
- How much cash do I need to borrow?
- How quickly do I need funding?
Considering how working capital loans process can make it much easier to narrow down the field.
Getting Approved For A working Capital Loan
Every business lender has its own unique lending criteria that they use to approve businesses for working capital loans. Basically, most lenders consider:
- Your business and personal credit score
- The time you’ve been in business
- Your annual revenue
With some lenders, it’s possible for you to qualify for a working capital loan with below 500 credit score providing that you have adequate revenue and also you have been running your business for a year or more. Other lenders will provide the working capital loans to small businesses with less than a year of operating history — if your personal credit score is above 500.
Some lenders only serve to more established businesses. Some lenders wish to work with businesses that are at least two years old and are generating annual revenue of $200,000 or more. Business owners with personal credit score of 640 or even higher can qualify however credit isn’t the only consideration here.
No matter what lender you work with, you’ll need to provide duplicates of your balance sheet and other financial statements when you apply for working capital. Checking your credit scores both personal and business, reviewing the revenue, and managing your financial paperwork can provide you a better idea of which lender you will need to work with for working capital loan.