Working
Capital
Loan
Get the Capital your business needs in less
than 24 hours.
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Working Capital Loan Overview
Average Loan Amount
$5K - $500K
Approved within?
&
Less Than
24 hours
What is a Working Capital Loan?
A working capital loan is a type of financing designed to cover the short-term operational needs of a business. Unlike long-term financing, working capital loans are typically repaid within a year and are used to manage fluctuations in cash flow, fund immediate expenses, or capitalize on sudden business opportunities. These loans often come with flexible repayment terms and may feature variable interest rates, which can influence the total repayment amount.
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Working capital loans are crucial for both new and growing businesses, providing them the necessary funds to enhance their operational capabilities without the long-term commitment of a traditional term loan. Businesses frequently utilize these loans to increase inventory, support payroll, or even expand operational space, effectively boosting their ability to generate profit and scale efficiently. This form of financing is particularly valuable for businesses looking to maintain smooth operations while navigating seasonal sales cycles or unexpected expenses.
How to Apply?
Plenty of businesses can qualify for a traditional term loan—as long as you’ve been in business for a minimum required period of time, have a good credit score, and are currently generating revenue.
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Not all business term loans are the same, though: the interest rate, loan term length, and maximum loan size depends on your business revenues and business credit rating.
How to Apply for a Working Capital Loan
STEP 1
Get Pre-qualified
To get pre-qualified for a working capital loan, click the "Apply Now" button and enter general information about your business.
STEP 2
Await Approval
Once processed, one of our Business Consultants will contact you to discuss the available options for which you qualify.
STEP 3
Receive Funding within 24 hours
Once approved and the offer is accepted, the funds will be directly deposited into your bank account, allowing you immediate access to capital
Documentation and Qualifications for Working Capital Loans
Documentation Needed:
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Application
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3 Months of Business Bank Statements
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Business Profit & Loss Statements*
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Business Balance Sheet*
* If needed
Qualifications:
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$120,000 in annual revenue
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6+ months in business
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Minimum 600 credit score
Obtaining a working capital loan is streamlined thanks to relatively minimal documentation and qualification requirements. Prospective borrowers need to provide a basic application form, alongside three months of business bank statements to demonstrate the company's recent financial activity. In some cases, additional documents such as business profit and loss statements and a balance sheet may be requested by underwriting for further clarification.
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As for qualifications, businesses are expected to have a minimum of $120,000 in annual revenue and at least six months of operational history. A credit score of at least 600 is typically required, ensuring that the business has a solid financial foundation. These criteria are designed to make working capital loans accessible while ensuring responsible lending practices.
Working Capital Loans: Pro Vs Cons
Working Capital Loan advantages
Working capital loans provide essential funds to manage daily operational costs, ensuring smooth business operations during periods of fluctuating or insufficient income.
Working capital loans are processed rapidly, allowing businesses to address their financial needs.
Obtaining working capital financing means business owners can retain full ownership of their company, unlike equity financing which involves sharing a stake of the business.
The capital from these loans can be used for a variety of urgent financial needs, including payroll, rent, utilities, or restocking inventory, thus enhancing operational flexibility.
Working Capital Loan disadvantages
Working capital loans may carry higher interest rates, particularly for businesses or owners with less-than-ideal credit profiles, reflecting a higher cost of capital.
The repayment terms for these loans are typically shorter, designed to quickly free businesses from debt
While there may be some fees associated with working capital loans, these are presented upfront allowing businesses to plan their finances effectively without surprises.
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Best Practices for Managing a Working Capital Loan
Effective Strategies for utilizing a working capital loan
Prioritize High-ROI Projects:
Focus the use of funds from working capital loans on projects or areas that promise higher returns on investment. Consider expanding product lines, enhancing business marketing efforts, or investing in cost-saving technology to improve your business efficiency.
Improve Inventory Management:
Use the loan to streamline inventory processes, avoiding overstocking and understocking situations, which can both tie up business capital unnecessarily. Effective inventory management can significantly boost your small business's operational efficiency.
Optimize Accounts Receivable:
Invest in enhancing your invoicing and collections processes to speed up cash inflows from customers. This reduces the cash conversion cycle and improves the liquidity needed for daily operations, helping your small business manage cash flow more effectively.
Regular Monitoring and Forecasting:
Keep a close watch on cash flow forecasts and actual cash flow. Regular monitoring helps in making informed decisions about deploying and replenishing working capital, essential for maintaining financial health in your business.
Leverage for Negotiation:
Use the financial leeway provided by the loan to negotiate better terms with suppliers, clients, or potential business partners.
Common Missteps when utilizing a working capital loan
Avoid Overleveraging:
Be cautious not to take on more debt than the business can handle, even if a lender offers more than what is needed. Overborrowing can lead to financial stress and difficulty in repayment, particularly for small businesses and startups.
Don’t Misuse Funds:
Strictly use the loan for intended short-term operational needs rather than for long-term investments or non-essential expenditures. This discipline is crucial for maintaining the primary goal of business sustainability and growth.
Maintain a Debt Service Coverage Ratio (DSCR):
Always keep an eye on your DSCR, which measures your company’s ability to service its debt with its current revenue. A healthy ratio ensures you can comfortably make loan payments, vital for business lending stability.
Looking for something different?
Inquire about our direct lending program today!
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Approvals in under 4 hours.
Dedicated financial advisors.
Minimal stipulations.