Starting a new business or expanding your business costs money and one of the biggest challenges facing business owners is getting the money they need. The business financing landscape is large and it’s hard to find the right method without some major research. One option that many businesses choose to cover everyday expenses is a working capital loan.
Working Capital Loans Explained
Loans are typically categorized based on what they are going to be used for. A working capital loan is used to fund the day-to-day operations of a business. They are often used for payroll, debt payments, and rent. They can also be used by the business during the slow season to cover immediate expenses.
A cash flow loan has some similarities to working capital loans, but are approved based on the past and future cash flow projections for your business. You typically don’t have to put up any collateral and the approval process takes just a few hours. This is a very flexible option compared to some of the other business funding options. However, you’ll want to be sure that you’re aware of the interest rate (often high) and be sure that you and your attorney read through the agreements before you sign.
Who Provides Working Capital Loans ?
While there are some banks that offer working capital loans, you’ll typically find an online provider offering the best terms and easy qualifications. A bank will usually have a much more stringent approval process to go through and you’re less likely to get a quick approval.
How to Increase Your Working Capital
The term “working capital” refers to when your assets are greater than your liabilities. If you want to increase your working capital, there are a few options:
Borrow money
Sell long-term assets
Replace short-term with long-term debt
Choose vendors that offer discounts
Analyze fixed versus variable costs
Manage inventory
Learn about tax incentives
Keep financials current
Many businesses struggle with increasing their working capital. If you’ve exhausted all of the above options for increasing yours, it might be time to consider looking at working capital loans. When you decide that you want to explore these options, contact Bold Growth Solutions to help.