capital loan

Understanding the Benefits of a Working Capital Loan

It’s a reality that some of the 28.8 million small businesses in the United States will suddenly run out of capital. They won’t have the resources to finance new inventory because of unforeseen circumstances.

How is your business faring in this regard?

You may be among the business owners wondering how to fill in the lack of resources to get through the month. If you find yourself in this situation, then a working capital loan may be right for you and the following information explains why.

What is Working Capital?

Working capital is a resource needed by a company to run its daily operations minus the debts that your company may have. Company assets and liabilities, regarding your capital, are as follows:

Current Assets

These assets include anything that has the potential to be converted into cash within one year and are also called liquid assets. Examples of this are cash and cash equivalents, cash receivables, and inventory.

Current Liabilities

These liabilities include debts that your business has to pay, at most, within the year. Examples of this are short-term debts, salaries payable, or utilities payable.

Why Would I Need These Loans?

These working capital loans are given to business owners who are running low on their working capital or short-term operational expenses. This need could come from several factors, including inconsistency of revenue throughout the year.

To sum it up, it’s simple debt financing used by a company to finance daily operations. This kind of loan also applies to different types of businesses. An example would be manufacturing businesses with cyclical sales, which need these kinds of loans when their retailers aren’t active.

In the case of traditional businesses, they may apply for working capital financing when they lack cash to pay employee salaries. It’s also an option if there is a lack of inventory to be sold and raw materials that need to be purchased.

Benefits of a Working Capital Loan

Unlike bank loans, a working capital loan is easier to process. Your bank may ask you to provide collateral for a traditional loan. A working capital loan is often a non-secured loan.

An affordable working capital loan does not ask you to sacrifice a portion of your equity. This non-secured loan means these financial backing options require less paperwork to apply.

One of the main complaints about traditional bank loans is that they take too much time. This type of business loan can take an average of 24 hours to process. This funding process will depend on your financial institution, making it useful for your short-term needs.

Jump-Start Your Business Today

Every business has working capital. Sometimes your business’ capital may lack funds to run your daily activities. This situation is where working capital loans come in. These solutions can help you get your business off the ground without creating a major financial risk.

Do you have additional questions about business loans? Are you interested in learning additional loan options available for your business? Contact us now and get your business started!

Combining a high level of personalized service with a cutting-edge lending platform, Formula Funding delivers an unparalleled banking alternative. We offer a fast and efficient option to get your business the critical funding it needs without the red tape. We work with all credit grades, tax liens, judgments, and charge-offs – something unheard of at a traditional bank. Since 2010 over 15,000 small business owners have used our funding sources to grow and expand.