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Friday, February 28, 2020

What is a Working Capital Loan?

African American man applying for working capital loan

Nationwide — If you are a business owner, you’ll know how difficult it can be to cover your day to day expenses and ensure a steady cash flow. At times, it may be a struggle to keep up, and you may find you are short of the money needed for daily expenses. When this happens, a working capital loan can be taken out, which can help with these day to day expenses. You might be wondering whether this kind of loan is right for your current situation, so here’s how working capital loans are used, and how you can apply for one.

What is a working capital loan used for?

Working capital loans are used for day to day business expenses, such as:

* Debts
* Payroll
* Rent or mortgage payments
* Buying supplies

A working capital loan isn’t intended to be invested in your business or to secure your long-term future. It’s merely a way of helping you through short-term financial issues.
Why might you need a working capital loan?

Small businesses often operate on narrow profit margins, so if the books aren’t perfectly balanced, then you may find yourself with a cashflow problem. This can happen if a client delays paying an invoice, if you have an unexpected expense like a repair, or if some funds are taking a while to clear. As a one-off, this kind of loan may help, but if you find yourself in this situation a lot, you might need to look at longer-term funding solutions.

How can I get a working capital loan?

The process of applying for a working capital loan is generally easier than most types of business funding. You can apply online at biz2credit.com, and, usually, you just need to give a few details such as the reason for needing the loan, your revenue and credit score, before you get a quick decision.

How long does it take for a loan to come through?

Working capital loans are designed to be short term, so it usually only takes a few days from being approved to getting the money in your account. This means it’s ideal when you have an emergency situation and need funding. You should consider how quickly you can pay off the loan, too, so that you can save on interest and don’t have the debt hanging over your head.

Are there alternatives to a working capital loan?

The best way to avoid taking out a working capital loan is to learn how to manage your cashflow. If you regularly find yourself with a shortfall, you may need to cut expenses, raise prices, or find other ways to save money, as this sort of borrowing is better used as a one-off.

A working capital loan can be ideal for times when you are having cash flow problems. No matter how well-balanced your books, there are bound to be situations where you need a little help, and this kind of product can be a lifesaver. It doesn’t take long to apply or get the funds, and as long as you pay it back when agreed, then it can be a positive for your business.