Suppose you ever find yourself struggling in business debt to the point where you’re afraid you won’t be able to continue operating as usual. In that case, it’s probably time to get a working capital term loan. This type of funding is to help take care of costs such as rent, payroll, debt payments, and any other expense that involves daily operations.
Even if you are doing financially well, for the time being, that doesn’t mean something won’t happen that might put you in financial peril in the future. That is true, especially if you are involved in seasonal or cyclical business models. Having a boost in working capital can put you ahead so that you’ll be financially stable in the future.
Keep in mind that this type of financing is not for long-term investments or assets. You use the money to pay for things you need now, and you will save now. You will be better off in the future, both in the short-term and long-term, as long as you earn enough to make a profit AND make payments back on the working capital term loan.
One of the most significant benefits of this type of loan is that it allows business owners to cover any gaps their organization might have in working capital expenditures. As long as you can get approved for an unsecured loan, there won’t be any equity transaction involved, which means you will be permitted to maintain complete control of the company. However, you’ll have to have good business credit to be eligible for an unsecured loan.
Working Capital Term Loan Benefits
Another benefit is that the money comes in at once as a lump sum, which increases the impact of the funding. This income can be very beneficial if you need to purchase products. The vendor offers discounts for large bulk orders.
A working term capital loan is not for every business, however. If you don’t have good business credit, you’ll have to put something up for collateral. You could use your credit account to apply for a loan if your company has no history or record of cash flows. Tying a working capital loan into your credit isn’t something you would want to do.
Also, interest rates with this type of loan can be comparatively high to other forms of business funding, so if you apply for one, you need to be confident you will make payments and not get charged any late fees or higher interest.
One lender that offers an easy application process and reasonable interest rates for its working capital term loan is US Business Funding. There are other funding solutions, as well as SBA loans, equipment financing, and vendor programs.