Best working capital loans for small business

The cost of working capital financing is presented as a factor rate to help business owners easily understand what they will be paying.

Factor rate = Payback amount / Funding amount

This does not include any additional fees. For example, Credibly assesses a one-time origination fee. This fee amounts to 2.5% of the total loan amount.

A good definition of a working capital loan is that it is money that businesses use to support daily operations. It’s the difference between current operating assets and liabilities.

Maintaining healthy working capital allows you to take advantage of every opportunity and provides a safety net when needed

Working capital loans help small business owners like you meet operational expenses, such as payroll, stocking inventory, and marketing.

These short-term loans can help stabilize cash flow and meet immediate business needs.

They are ideal for business owners who need flexible, short-term funding without the hassle of going to a traditional bank.

The formula for calculating working capital is current assets – current liabilities = working capital

Working capital is the difference between a firm’s current assets and current liabilities.

Current assets are the tangible and intangible items that your company owns.

Current liabilities include all of the debts and expenses firms expect to pay within one business cycle.

Because working capital is the money you have available to meet your short-term needs, it is critical for sustaining operations.
It is also a measure of a business’s ability to pay off short-term business expenses or debts.
That’s why you need to work with a financial institution that will provide the financing you need, not mire you in red tape that takes weeks or months to navigate.

Working capital loans are loans that are geared to small businesses to help them gain the funding they need to thrive in their industry.

Rather than a long-term investment, like that made through private equity investors, you are not required to provide a percentage of your profits to the loan agency. Rather, the loan agency will offer you a fixed interest rate that never fluctuates over time.

The loans are provided on a short-term basis with working capital loan terms customized to your available budget. They can help you cover the continued operational costs of your business, without accruing long-term debts in the process.

The purpose of a working capital loan is to have funds available to pay your business' financial obligations during a slump in revenue and still allow you to have a cushion of money for emergencies.

Working capital loans can cover:

• Monthly debt payments
• Payroll for your employees and staff
• Utilities for the business
• Mortgage or rent payments for the business
• Buying inventory or materials required for you to meet customer demand
• Repairs or replacement of required equipment or tools for your business

As important as it is to get a solution quickly to meet your needs for business capital, it is vital for you to understand all the fine print before you pursue a specific loan program.

According to huffingtonpost.com, today's small businesses are seeking alternative funding solutions, online, for short-term capital needs. Sometimes you can find a loan through the Small Business Association (SBA).

Other times, it's best to go through an alternative lending institution that offers a solution that fits your needs and limits your repayment risks, even if the loan rate is slightly higher.

The idea is it is better to get a loan you need with terms that you can handle than to struggle with a loan product that does not fit your business.

Working capital loan eligibility requirements can vary between lenders. In today's economy, lenders need assurance that you are good for the money, so collateral of up to 90 percent of the loan amount is required.

Qualifications will depend on your income and projected business earnings, with loan amounts and repayment terms varying based on eligibility.

While they have strict eligibility requirements, they are easier to qualify for than traditional business loans, making them a good alternative if you've been denied commercial loans.

As a business owner, you need constant capital to cover the continued operational costs of your business, and without consistent loan options, you risk defaulting on your lease. Fortunately, there are a variety of funding methods available to get the money you need.

Working capital loans provide a lot of advantages to business owners by enabling you to get the money you need quickly and providing easy terms for repayment. For all your working capital needs, contact Credibly.