What are Working Capital Loans?
At their most basic level, working capital loans are a way to manage small businesses daily operational expenses. Working capital is what keeps a company afloat day in and day out. If you need to cover these day-to-day short term business expenses and pay bills, working capital loans provide a way to keep operations running smoothly with shorter terms and smaller loan amounts.
Working capital loans aren’t used to purchase long-term investments or current assets but rather to fuel everyday cash-on-hand needs. These loans can cover anything from rent and payroll to debt payments and utilities if your existing assets and liabilities don’t add up.
One of the most crucial components business owners must contend with is managing operating capital in any business. Many companies need access to capital at one point or another to supplement cash flow issues and help cover operational costs. Working capital loans, often also called cash flow loans, is the funding solution to get you through those rough patches when cash is low that you can run into while running your company.
Uses of Working Capital Loans
Working capital loans may be necessary to cover expenses to move your business forward and proliferate growth when your funds are short. Cash flow is crucial for many reasons, such as covering payroll requirements, since employees obviously expect to get a paycheck. Utilities must get paid, inventory may need to be restocked, and all other conditions that go into running a business must be covered. Still, when your operating capital is insufficient, you need a working capital loan. Your business requires a reliable funding originator to turn to for assistance, and AdvancePoint Capital can help you find the working capital financing that fits your needs.
What Are the Best Working Capital Loans? How Does a Working Capital Loan Work?
The most common types of working capital loans are short term loans and business lines of credit. A short term loan is relatively self-explanatory — a small business loan with a fixed, short-term repayment schedule. You also receive a fixed amount of cash in one lump sum with these small business loans.
A line of credit works a bit differently, allowing you some additional flexibility. Businesses can borrow money up to a certain limit and only pay interest on what they actually borrow. They can draw and repay as needed, as long as they don’t exceed this limit.
Whether you’re low on cash flow from daily operations or suffering from unpaid invoices, or perhaps business growth pains without sufficient cash flow, a working capital loan can be the answer and AdvancePoint is here to help find the best solution for your business capital needs.
Unlike traditional banks or a direct lender, Advancepoint has a network of lenders with a variety of business resources and financing products for small businesses at competitive interest rates and loan costs. We can get you approved and funded in as little as 1 business day.
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The 7 Best Working Capital Loans to Consider
Business Line of Credit
A line of credit allows businesses to draw funds up to a certain credit limit and will only charge interest on the amount of money borrowed, similar to that of credit cards. A line of credit is unlike a traditional loan where you'd be given a one time lump sum of money that you'd pay back over a set period of time with interest in monthly payments. This product is a great working capital line.
Small Business Administration SBA Loans
The SBA offers a variety of small business term loans at attractive interest rates and terms. Qualifications are stringent with both your business credit and personal credit. Paperwork can be voluminous, but it's work the effort.
Short Term Business Loans
Short term business loans are defined as repayment terms between 6 to 18 months. Short term business financing are small business term loans that is considered lower risk due to the shorter repayment period and daily or weekly payments. Short term financing allows lenders to accept a lower personal credit score and reduce documentation for approval. This is an unsecured loan, meaning no real estate needed. Minimum annual revenue of $200,00 required.
Merchant Cash Advances
Merchant cash advance provides upfront capital to businesses based on annual revenue and repaid to merchant cash advance providers a greater sum and repayment terms that are made by a set percentage of future credit card transactions.
Business Cash Advance
Business cash advance, also known as a future sales receivables agreement, provides a lump sum of money upfront with a greater amount paid back the advance provider by a set percentage of future sales deducted from business bank account. Credit card sales are not required for this product. No minimum credit score for some businesses.
Business Credit Cards
Credit cards are a great additional option in conjunction with other business financing options, that can be used to help support funding needs. Credit cards are lines of credit that do have a personal guarantee. Must have good credit history and decent credit scores for approval. Minimum credit score may be required. Credit cards help you improve credit for future loans.
Invoice Financing
Invoice financing, also called invoice factoring, is for businesses that regularly invoice clients. This product provides advances off of outstanding invoices that are unpaid within the repayment terms. A factoring company will advance up to 95% of invoice as long as the invoice is not delinquent in the accounts receivable aging report.
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What Financial Institutions Will Help Me Get a Working Capital Loan?
A variety of entities that offer a working capital loan.
- Market Place Business Funding Providers
- Business Loan Brokers
- Online Lenders (FinTech)
- Invoice factoring Companies
- Banks
