When is Your Company Ready for a Working Capital Loan?

When is Your Company Ready for a Working Capital Loan?

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Are you a small business owner? Whether you recently started your business or your business is 20 years old, you know you need working capital for things to run smoothly.

Sometimes, however, cash flow runs short. This scenario is when you can turn to a working capital loan.

Continue reading to learn if your company is ready for a working capital loan.

What is a Working Capital Loan?

The working capital a business has is equal to current assets minus current liabilities.

Sometimes this number is positive, but other times it can be negative. When it is negative, it may be time to look into a working capital loan.

A working capital loan is a short-term loan available to businesses. It’s used to cover daily business operations, such as wages and rent. These loans cannot be used to purchase long-term assets or investments.

Businesses with unpredictable sales cycles often use working capital loans to get through the year. With a working capital loan, business owners do not have to sacrifice any ownership of their business.

Types of Working Capital Loans

One type of working capital loan is a merchant cash advance, which means you borrow against your future debt and credit card receipts. You can often borrow anywhere from 50 percent to 250 percent of your business’ credit card transactions.

Another type of loan is invoice financing. This process is similar to the merchant cash advance except that your unpaid invoices are collateral.

The funding turnaround for these two types of loans is fast and the repayment period is short.

Businesses can also apply for lines of credit. It is a flexible option that functions much like a business credit card. You can tap into the funds whenever you need them.

Term loans are another option and the most typical type of working capital loan. Borrowing limits can be high, and the APR (annual percentage rate) maxes out around 30 percent. The repayment period is usually between 3 to 18 months.

Applying for a Working Capital Loan

Once you realize your company is ready for a working capital loan, the application process is the next step.

Applying for a loan is simple. Every lender has its own set of criteria, but most lenders look at your personal and/or business credit scores, the length of time you have been in business, and your annual revenue.

With some lenders, you can qualify with a credit score of 500 or below if you have sufficient revenue and been in business for at least a year. If you have been in business for less than a year, your credit score becomes more important.

Apply for a Loan Today

At Formula Funding, we can approve your business for up to $250,000 in working capital in just 24 hours. Despite your credit situation, we guarantee to offer the lowest cost of funds or we will make your first payment for you.

With rates as low as 5.99 percent and no collateral or assets required, you will have the ability to fund your business and take care of all your company’s needs.

Apply today and get an instant quote in under three minutes.

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.