Making Sense Of A Working Capital Loan

Working Capital Loans 101

Many new business owners may not be familiar with the term Working Capital Loan, as well as business owners who have tried traditional banks but have been turned down. In general it is a short term loan designed for business owners who do not meet the strict requirements of a traditional bank loan. It can be used to fund the expenses of your day to day business operations, without the strict requirements of a traditional bank loan. The difference is that it is a short term loan that will not help with long term investments or assets. It is designed to help with fixed or variable costs associated with the day to day business operations.

What Defines Variable and Fixed Costs?

Variable costs will normally include things such as electricity and water, while fixed costs are related to rent and wages paid to employees, just to name a few. One of the biggest expenses with any business is advertising and marketing your product or service, and normally requires a substantial investment to do it properly. The nice thing about a short term working capital loan is that it can be used for any of your fixed or variable cost expenses. Unlike going to a traditional bank, this type of loan does not require a specified place where it has to be spent, you choose to spend it where you need it.

How Important Is Working Capital For A Business?

Let's face it, the economy isn't the greatest, and inflation rates are at an all time high, making it difficult for many business owners just to meet the daily expenses of running a business. Because of this, many business owners have fallen behind on payments, which has caused their credit scores to drop giving them poor credit. This doesn't change the fact that working capital is critical to the success or failure of your business. A poor credit score is anything in the range of 300-629 according to the major credit bureaus, which labels millions of business owners as having poor credit. With a poor credit rating it is nearly impossible to get a low interest, long term loan from a bank. This is where a working capital loan can be a huge benefit to a business as it is not based on credit, but entirely on the revenue of the business.

When Is A Working Capital Loan Right For Your Business?

There are a lot of reasons, but some of the most common are expanding your business, buying new equipment, adding more staff, just to name a few. The best time to get a working capital loan is when revenue is good, and it's time to expand and grow your business. If you're like millions of other business owners who cannot obtain business funding from a traditional bank, then this type of loan is a great alternative, and does not require good credit or endless amounts of paperwork. 

What Are The Benefits Of A Working Capital Loan?

As mentioned above, they don't require good credit, or endless amounts of paperwork. Some other benefits are that you do not have to put up any of your assets as collateral, and funding usually happens in 3-5 days, not months. As far as documentation goes, all that is required is a simple one page application and your last 3 months business bank statements. 

What Are The Options For Repayment?

These are short term loans, usually between 6-18 months, and have either a daily or weekly payment option, there are no monthly payment options. Often times business owners will confuse these alternative loans with traditional bank loans and want a monthly payment, they don't exist. The advantage of the working capital loan is that your business is only in debt for a short period of time, and you can get discounts for early pay offs.

​At Small Business Capital US we have over 95 different types of working capital loans, and will work to customize a program that fits your business needs, specifically for your company. Give us a call at 800-681-0834 for a free consultation, or just click on the button below. 

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