It takes money to run a business. It doesn’t matter if you need to replenish inventory or put gas in a vehicle for a repair service; you need working capital to keep things moving. Unfortunately, working capital can get tight for some small businesses and make it challenging to continue some day-to-day operations. At Capital Dude, we have a solution for you with working capital loans, so you have the money you need when you need it. If you’ve never considered small business loans like a working capital loan, we can help answer some questions you might have, starting with, “What is a working capital loan?”
What is a working capital loan?
A working capital loan is a loan available to a business to meet everyday operational needs. Often, working capital loans are provided for a company that’s in a pinch and needs money quickly. They’re designed to help make ends meet for a short amount of time until the business can function independently.
What can I use it for?
Working capital loans are often considered flexible, short-term solutions to financial problems. A business owner can use a working capital loan to purchase inventory, pay for equipment repairs, or make the rent payment for the month. How a working capital loan is used is up to the business owner, but it’s not recommended that they be used as a way to fund a long-term expansion project. For instance, a working capital loan can be used to make payroll for the pay period, but it’s not recommended that a business owner use it to buy a new vehicle for the fleet. However, the funds are flexible and aren’t restricted to basic expenses.
Why should I get one?
It’s not uncommon for businesses to hit a slow season where revenue isn’t flowing in at the rate you’re used to. When this happens, it’s nice to know that you have a solution readily available in a working capital loan. Beyond a lull in business, you might have an unexpected repair with your equipment that needs to be made to make sure you can continue operations. Consider a working capital loan to help bridge the gap to get through the slow season or get things back up and running as soon as possible.
Are there different types?
There are a variety of options when it comes to choosing a working capital loan. The most common types of loans are line of credit, SBA, and invoice financing. Each has its pros and cons that will fit with your business. Let’s take a quick look at each.
Line of credit
A line of credit works similar to having a credit card. You have funds readily available when you need them and can access them with the swipe of your card. Rather than having a separate business card, you can access your line of credit with your business debit card when you need money. Move money from your line of credit to your bank account, and it’s ready to go. You can pay back your line of credit as you go, which will also help your credit.
SBA
SBA stands for Small Business Administration and is a government organization that offers loans to small businesses. While SBA loans can be difficult to qualify for, you have the backing of a government organization guaranteeing your loans should you default.
Invoice financing
The process of invoice financing is also known as factoring and can be used by businesses that invoice clients for products and services. Sometimes clients are slow to pay on invoices, putting a small business in a bind. With invoice factoring, you can get a cash advance on your outstanding invoices so you can make your rent payment or utility bill without having to push the issue with your client. Factoring advances are often paid back in full with an additional predetermined percentage or fee after the invoices are paid rather than an extended term.
Reach out to apply
If you need money for your business, you probably need it now. Don’t put off looking around trying to get the answer to, “What is a working capital loan?” Instead, get the money you need. Our team at Capital Dude can often help you get your funds within 48 hours after applying. Contact us at 877-485-2779 or send a message if you have other questions. If you’re ready to apply, fill out our loan application today.
