Working capital is a term that describes the net liquidity of a business. It equals the total liabilities of the business minus its total assets. If you have negative working capital because your business is new or experiencing slow growth, you should consider obtaining a working-capital business loan.
Working-capital business loans are similar to business lines of credit, because they’re meant to help your business sustain its day-to-day operations and expenses. They offer a cash reserve you can use to hire more employees, purchase new equipment, or add more inventory. If you lack cash reserves to pay for needed business expenses, a working-capital business loan can make up for the money you don’t have at the moment. As you start building up your company assets, you can repay the loan and watch your working capital rise.
There’s no clear distinction between working-capital business loans, business lines of credit, and short-term business loans. In many respects, they’re all the same thing, since each increases a business’s working capital. Traditionally, however, working-capital business loans have been short-term loans meant to cover immediate business expenses. They’re meant to help businesses grow, especially when they’re new or going through a period of slow growth.
Here are the main benefits of obtaining a working capital business loan:
Boost Cash Flow – Small businesses depend on steady cash flow to pay for their monthly operating expenses. If you don’t get many customers or cash flow from selling your products or services, a working capital business loan is the only way to keep your business afloat. Just make sure you have a plan to boost your revenue quickly. You don’t want to keep borrowing money forever to pay your operating expenses.
Emergency Fund – Every small business needs to have an emergency fund in case some unexpected expense or problem arises. What if bad weather or an intruder damages your building? What if you suddenly run out of inventory and have nothing left to sell your customers? These are cases where an emergency fund can help tremendously. A working-capital business loan can become your emergency fund.
Expand Your Business – Once your business is generating steady cash flow, you might want to take the next step and expand the business. This might require leasing or purchasing another building, hiring more employees, investing in training, purchasing more equipment, and so on. Even a positive cash flow probably won’t be enough to pay for all the expenses an expansion will generate. That’s why you need a working-capital business loan for this purpose.
Ready to apply for a working-capital business loan? If so, Globelend Capital is ready to guide you through the application process. The entire process can be done over the internet in less than 6 minutes. The decision on the loan approval will take up to 24 hours. There are no upfront fees to worry about. Most applicants are approved for these loans unless the owner has a terrible personal credit score.
Working capital business loans can be anywhere from $25,000 to over $1 million. Most small businesses need between $100,000 and $500,000. If you’re unsure how much you need, start out with a relatively modest $25,000 loan. You can always request an increase in your limit if you’ve successfully made payments toward your loan amount.