What is Working Capital?
Working capital, also known as operating capital, is the amount of cash available to cover the day-to-day expenses of a business. In essence, it is the amount of money a business owner has in hand to run his or her business. Working capital is essential to cater to all the daily expenses of a business, from electricity bills to rent, among other expenses. Businesses should focus on having sufficient working capital to maintain sustainable business growth. Gathering enough working capital on your own to run a successful business can be quite stressful. As such, it is important to be aware of your options for working capital loans.
Most small business owners are conversant with working capital calculations. However, if you’re not familiar with how to calculate it, here’s a simple formula to obtain the working capital of your business:
WC = CA – CL
Also, to obtain your business’ working capital ratio (WCR), the required formula is:
WCR = CA ÷ CL
CA = Current Assets, which is the business assets that can be converted into cash
CL = Current Liabilities, which are the debts you must cover.
Note: WC and WCL are often calculated on a ‘’per annum’’ basis. In other words, CA and CL will be based on one year.
What is a Working Capital Loan?
Obtaining capital loans can be quite challenging for small businesses because of their sometimes-daunting approval requirements. However, it is feasible for small business owners to get reasonable working capital loans from financing firms like Globelend Capital.
Considering the benefits of a working capital loan, and its flexibility in terms of immediate injection of funding into a business, it is a reasonable loan option for every business owner. In the case of emergency business slowdown, a working capital loan can be a solution in terms of financing.
Why do You Need a Working Capital Loan?
Having more than enough capital to cover the expenses of your business is vital. It becomes more important if you’re looking to grow your business. Even if you a moderate capital now, injecting more funds into your business via a working capital loan could increase your business operations – and returns – dramatically.
A working capital loan allows you to cover gaps in your business expenditures. It is easy to obtain, and does not always require collateral.
When applying for a working capital loan, you should look out for certain things to select the best lender. They include:
- A fair interest rate
- Good repayment terms
- A stress-free application process
- A quick application process
Options for Working Capital Loans
Business owners or entrepreneurs are eligible for different types of working capital loans, depending on what they deem fit for their businesses.
Working Capital Lines of Credit
A working capital line of credit leaves you with the flexibility of borrowing funds as needed for your business. You don’t have to obtain a lump sum of money all at once. With a working capital line of credit, you can borrow funds gradually for short-term projects, which makes payback easy.
This is a secured type of working capital loan. Short-terms loans are designed to help business owners meet short-term business needs. They often have a fixed interest rate and repayment duration. If you don’t require much working capital or want to use the loan to complement the capital you have in place, this loan option could be your best fit.
Merchant Cash Advances
Merchant cash advances are one of the easiest ways for businesses to access working capital. In a real sense, it’s not really a loan, as it works in a different way from other working capital loans. With merchant cash advances, the fund provider takes a portion of your business’s credit-card sales, typically daily, until the loan and interest is fully repaid.
Preparing for Small Business Working Capital Loans
To hasten the approval of your small business working capital loan, it is important that you are well prepared. Here are some things that will be required of you:
Know your Business Plan
Keep your plan, vision and mission in mind. In your plan, you should be able to highlight how you’ll use the loan.
Improve your Credit Score
Your personal and business credit score will not necessarily aid the approval of your working capital loan, but it does speak to your financial responsibility. The higher your credit score, the easier is it for you to get approved for a huge working capital loan. Try as much possible to improve your credit score.
Gather all Relevant Documents
The documents to be submitted for a loan application vary, depending on the lender. Generally you’ll expected to provide your personal background & financial statements, income tax returns, a statement of loan application history, and a business certificate. Prior to the loan application, research the documents required of you and compile them appropriately.
Enjoy an Amazing Working Capital Loan from Globeland Capital
Globeland Capital is committed to offering outstanding working capital loans to small businesses in need. We offer loans in the range of $25,000 to $500,000 to help small business owners grow. Our loans come with good repayment terms and a low interest rate, with a fair repayment durations between six months and five years.
Just as we’ve helped several other businesses with working capital, you can also count on us to help you with the working capital you need to grow your business. If you’re interested in this offer, apply now!