Every small business has experienced how important it is to have sufficient working capital on hand. Working capital is the money a business needs to operate and the cash your company has to cover costs.
The operating costs include buying inventory, paying employees and maintaining your building. If your capital is spread thin, it's time for a working capital loan.
In this article, you will learn when to get a small business loan and how it will help your business grow.
Business Line of Credit – How it Compares
In the world of working capital there are few options for business owners. Traditionally, those options include a business line of credit or a small business loan.
A business line of credit helps a company meet its short-term financial needs. Unlike a loan, businesses pay interest on the amount of credit they use. In turn, the line of credit is a flexible option. Companies apply for a business line of credit to use at various points of the company's life.
Secured vs Unsecured Working Capital – How it Works
For those who may have a low credit score a secured loan helps lower the bank’s financial risk. Borrowers put up an asset as collateral for the business loan in order to get approval. An unsecured loan doesn’t have a collateral requirement, which makes it desirable for small business owners.
Learn about unsecured business loans in depth. These loans are a flexible choice for a businesses cash flow.
Is Working Capital Like a Business Cash Advance?
Small businesses advantage is that there are many types of capital loans available, including a business cash advance.
A business cash advance is one type of short-term loan that works for companies needing a capital injection without going through the lengthy application process that traditional loans require.
Business cash advances are most beneficial if the companies plan to pay off their loan right away.
Documentation Needed for Working Capital Loans
The next thing to consider are the types of documents needed. Depending on the type of loan and your lender’s preferences, there is always some paperwork when you apply for a business loan.
Ventures that specialize in working capital arrangements may have fewer documentation requirements.
At Express we make it simple. All you need is to fill out the loan application and submit bank statements from the past six months.
Are Working Capital Loans a Good Idea?
Is it a good idea to incur some debt and get a working capital loan? Many companies must invest into their organization in order to expand and meet their short-term and long-term goals.
Small business owners have few options if they shy away from borrowing money. The key is to choose the right loan product for your company and your situation.
Paying Off Your Loan and Your Options
Your payoff options should be a factor in influencing your decision about what type of loan you want and which lender you choose.
At Express, there are no pre-payment penalties and discounts are awarded for early payoff. The quicker you pay off your loan, the lower your overall cost is for your business.
Advantages and Disadvantages of Loan Capital
Taking out a loan for your working capital needs means you’ll need to weigh the pros and cons. Short-term loan products help owners retain complete control of their company. In addition, give them the financial resources to reach higher levels of success.
Two Alternate Types of Working Capital Funding
The other top advantage of a working capital loan are the variety of types offered. Some companies use accounts receivable loans that are tied to their invoicing practices.
If your company processes credit card payments, a factoring loan may be an option. Receivable financing along with factoring are a much more expensive solutions for business.
What Working Capital Loans Can Be Used For
No matter what type of working capital loan type you choose, these programs are flexible in how you use the funding. It can go toward almost any kind of business expense.
Businesses use loans for expanding their physical space, paying their employees, purchasing supplies or meeting large-scale orders.
One of our client's are painting contractors and utilize the working capital funding to start up projects and to buy materials. When the project is complete they pay off the loan. They love our program because our client avoids long term debt and high interest costs. By revolving the funding on a monthly basis they are able to save a tremendous amount of interest.
To give you an idea of what the working capital funding can be used for, we have provided a list of the most popular.
Working Capital Loans Interest Rates
It helps to understand interest rates for business owners, especially before agreeing to a loan product. Ideally, aim to partner with a company that offers a competitive, low interest rate that makes the cost of borrowing nominal.
At Express, rates are as low as 5.9 percent, depending on the loan product.
Short Term Working Capital
Today, businesses have more options to get short-term capital without jumping through hoops that traditional lenders require. These loans main function is factoring in the term length.
There are direct lenders whose terms are from one to nine months. This gives your business the capital it needs for a specific purpose to help boost your cash flow. Loan amounts range from $5,000 to $150,000.
Express Capital's business loan products designed for short term and quick capital needs, often related to cash flow.
Get Answers To The Best Type of Loan For Your Business
See how businesses similar to yours benefit from an injection of cash into your operations and take the steps to grow your business.
Learn about additional options for working capital loans. Visit us and fill out the contact form or simply call.