The Best Working Capital Loans For Small Businesses
Small business loans for long & short term financial working capital needs.
The Best Working Capital Loans For Small Businesses
Small business loans for long & short term financial working capital needs.
What is a Working Capital Loan?
Most small business owners need extra working capital at some point, regardless of their financial health. A host of unforeseen circumstances can cause revenue to dry up or compromise the majority of operational funding. Common examples include bad weather, changes in demand, or even a fire in the business next door.
The inevitability of these events resulted in the popularization of Working Capital Loans.
While the typical financial institution and other business capital products are geared towards long-term investments or massive expenses, a working capital loan is designed to help businesses recover from temporary cash flow issues, everyday expenses and to take advantage of new opportunities. If you don’t need a lot of money but need more than a little, working capital loans could be the exact solution you’re looking for.
Flexible Payments
Automatic payments calculated based on a percentage of the business’ credit card sales or other receivables
Estimated Completion Date**
Payments are based on the business’ receivables so there is no fixed payment term
Cost and Fees
The receivables are purchased at a discounted price and fees may be charged and deducted from the advance amount
**An estimated completion date is calculated based on the estimated time it will take the business to deliver the receivables (which will vary based on the business’ performance). These estimated completion dates typically range between 3 months up to 18 months, but this is only an estimate.
Working Capital Loans allow fast access to capital.
Approved businesses generally met the following criteria:
Annual Revenue
Over $180K
Credit Score
550+
Time in Business
Over 2 years
Application Process
Choose Your Working Capital Loan
We usually recommend the loan options that feature the most uncomplicated repayment terms for your cash flow. This depends on the length of your cash flow gap and how quickly you’ll be able to pay off the loan.
Gather Your Documents
- Voided business check
- Bank statements (3 Months)
- Drivers license
Get Funded
Working Capital Loans FAQ
When Is a Working Capital Loan a Good Idea?
This product is appropriate for short-term requirements or cash flow gaps that are expected to last no more than a few months. Ordering merchandise, settling short-term debts, and taking on costly initiatives that might otherwise jeopardize operations finance are all frequent activities.
What Is a Good Working Capital Ratio?
A good operational capital level is commonly defined as a ratio between 1.2 and 2.0. A ratio greater than two, on the other hand, may indicate inadequate expenditure or an excess of idle operational capital. If your ratio is less than one, you may be facing liquidity issues soon. Perhaps you haven't re-invested enough revenues in the business or haven't spent enough money to achieve expansion.
What Do Businesses Use Working Capital Loans For?
You might use your working capital funding for any of the following things:
- Creating a cash flow cushion
- Meeting business growth needs
- Payroll- Inventory
- Rent
- Sales & marketing costs
- Website updates
Of course, you can use your working capital loan for other reasons that will help your business.
How Do You Calculate The Working Capital of a Business?
To calculate your business’s working capital, see the calculation below. The numbers that make up both parts of the equation should appear on your most recent balance sheet.
Current Assets = What your business owns (Cash, Inventory, Accounts Receivable, etc.)
Current Liabilities = What your business owes (Bills, Payroll, Loans, Accounts Payable, etc.)
Net Working Capital = Current Assets – Current Liabilities
Your current assets must exceed your current liabilities to meet short-term business obligations. , if you intend to grow your business, you should make sure to increase the gap between what your company owns and what your business owes.
The working capital formula will produce an amount in dollars. Sometimes, though, looking at this number won’t immediately tell you if you have healthy working capital. Due to individual factors like industry or company size, which seems like healthy working capital for one business could represent the bare minimum for other companies.
The answer to your working capital ratio, on the other hand, leaves no room for uncertainty. While the net working capital formula subtracts assets from liabilities, the working capital ratio formula divides them.
Current Assets / Current Liabilities = Working Capital Ratio
Can I Get a Working Capital Loan with Bad Credit?
Yes, a company owner with negative credit may get all forms of working capital loans. However, keep in mind that credit score affects various items in different ways. For a merchant cash advance, for example, your borrowing amount is nearly completely determined by your monthly debit and credit card sales. Similarly, your credit score has little impact on your ability to get accounts receivable finance for outstanding bills and most other types of short-term loans.
In the case of a short-term working capital loan, however, your credit score, as well as your rates and conditions, are taken into account.
Speak with a business advisor
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