In this blog, you will learn the financial vehicles that qualify as a working capital loan; as well as their differences and advantages. In sum, this type of loan is intended to aid your company in meeting its daily financial obligations. As opposed to other loan types that are meant for expansions and acquisitions. Anything that you can reasonably classify as a short-term financial need, the working capital loan probably fits.
What Qualifies as a Working Capital Loan?
Many options fly their flag under this banner. The traditional bank line of credit is one for example since you can keep this line of revolving credit open to meet your needs as they arise. The short-term loan is in a similar vein – at least insofar as the short-term financing aspect is concerned.
Another working capital loan is available through factoring companies; for this one, you outsource your accounts receivable financing to a specialist company that pays you the bulk of the values on the receipts upfront. You get the remainder of your money – less the finance fees – once the pay period range has concluded.
Trade credit, equipment financing, and personal source funding (such as loans from family, HELOC, or P2P) also qualify as working capital loans. In the former, you may not even have to be responsible for paying interest.
How Do Working Capital Loans Help Directly
The most important attribute is the ability they provide you to quickly tackle unforeseen financial problems. Sometimes, you simply cannot afford to wait for the weeks-long approval process associated with most traditional loans, or you don’t have the necessary collateral for many types of non-traditional loans. Usually, you have to give up some company equity for fast loans – but this may not be optimal for the direction in which you intend to take your business.
For more information on short-term working capital loans, peruse our website; or, you can also reach out to the financial and business experts at Ideal Financial Group.