Working capital loans can provide the following advantages to your small business:
- Speed – Know in one hour or less if your business qualifies
- Flexibility – No restrictions on how you use the funds
- Hassle-free – Paperwork is very light so application process can be done quickly
- Affordable rates – Rates start as low as 6%
What is a working capital loan?
A working capital loan is debt that finances a company’s “working capital” needs. Working capital is defined as current assets (e.g., cash, A/R, inventory) less current liabilities (e.g., A/P, accrued expenses). So a working capital loan provides cash for a business that typical has very high current assets such as accounts receivable (A/R) and/or inventory.
Banks like to lend against the net working capital (current assets – less current liabilities), or NWC, is positive, the A/R is high quality (i.e., good credit customers who pay timely), and the inventory turn over (i.e., sales) numerous times per year. Since A/R and inventory are typically the primary assets considered for a working capital loan, these line items on your balance sheet will be closely examined by potential bankers. They will want to see an A/R aging, A/P aging, description of physical inventory on hand, and of course historical and projected financial statements.
In addition to examining the business, a small business lender will want to understand your personal financial position. Your credit score is a very important (680 or higher is ideal) data point, as well understanding any important events that may have an impact on your collateral and credit score (such as death or divorce of a spouse, pending or ongoing litigation, etc). Note that the small the loan and the size of your business, the more important your personal financial position is. For large loans in bigger businesses, bankers tend to base their decision mostly on the company and its ability to repay the loan.
If you are in the market for an affordable working capital loan, please complete our pre-qualification application and we will have a banker contact you within one business day.