Sometimes, when a company needs to widen the bridge between their current assets and liabilities, they seek a short term working capital loan. One obtained by the SBA is often used toward advertising, purchasing, or renting business equipment, making upgrades, to help make payroll, or other operating expenses.
The SBA 7(a) program offers options for those requiring short-term working capital financing, including the Rural Business Loan Program, CAPlines, Advantage Business Loans, and so forth. These programs provide not only short-term solutions but long-term operating capital for those who qualify. If your business qualifies, expect interest rates to be approximately 6 – 8%.
You could also opt for a working capital loan from a bank if your credit score is high enough. Banks offer traditional term loans as well as business lines of credit. The repayment plan could be anywhere from 1 – 10 years, depending on how much you borrow, or whatever your credit limit is, and whether you spend it all at once. The interest rate is typically between 5% – 10%.
Suppose an SBA loan or traditional bank loan isn’t for you. In that case, you can always check with alternative lenders or look into short term working capital cash advances. Merchants usually offer the latter, and an MCA isn’t that difficult to get approval for. The application and approval process can be within several hours, with the funding taking no longer than five days.
Short Term Working Capital Types
It can be a slightly risky endeavor if you cannot make enough sales through credit cards, which is how you should pay the borrowed money back through an MCA. Some lenders who offer this type of working capital charge annual percentage rates on top of the cash advance loan’s total cost and other fees. Only consider a merchant cash advance if you don’t think you’ll qualify for another short term working capital solution, and you are confident that your daily credit card sales will allow you to pay it back easily.
As for alternative lenders and funding solutions, the internet age allows for many different options and opportunities. Look into microloans, crowdfunding, and even B2B lending.
One alternative source for small business funding and short term working capital you should look into is US Business Funding. It is committed to offering small-to-medium-sized businesses the financing they need to operate and even grow their companies effectively. You can fill out a form right now to find out if you qualify.