Running a profitable business generally requires working capital, and when your incoming revenue stream is erratic, it can be difficult to plan on having the necessary funding to keep the business running smoothly. When you find that it’s difficult to meet the expenses of day-to-day operations, a working capital loan can be the perfect solution for your business.
Definition of Working Capital
Working capital is the amount you have left over after you subtract your business’s current liabilities from its current assets. This should tell you how much money you have on hand to pay your immediate expenses. When the amount of working capital you have is inadequate to cover your daily business expenses, it becomes necessary to secure funding from some other source, such as a working capital loan.
How to Obtain a Working Capital Loan
If you’re applying for a working capital loan at a bank, you should keep in mind that they will generally be looking at the same five factors for all applicants. In general, banks consider an owner’s character, their ability to repay the loan, their creditworthiness, the cash flow status of their business, and whether they have any collateral which can be used to secure the loan.
When you apply for a working capital loan from a non-traditional lender, they will still be looking at your credit score and your monthly incoming revenue, and they’ll also consider your business plan and your balance sheet before making a decision. You might also consider applying for a business line of credit, which is the most flexible kind of financing you can have. A business line of credit need not have any stated business purpose, and can be used to cover any kind of business expense.
Merchant cash advances are available from non-traditional lenders as well, although you will need to supply several months’ worth of credit card data, in order to prove that you have sufficient credit card sales to qualify. SBA loans are available from a great number of banks, after you have qualified through the Small Business Administration. While the criteria for approval are somewhat stringent, if you do qualify, your chances of being approved for a loan by a bank are very good.
Does Your Business Need a Working Capital Loan?
If so, we may be able to provide the financial assistance you need. Contact us at GP Solutions, so we can discuss some options that may provide you with the working capital you need.