It is evident that any small company needs some working capital financing for daily business operations. You will need these funds to take care of short-term financial problems like paying your workers or buying additional equipment. The funds are utilized in running and expanding your business.
Alternatives for getting a working capital
If you are new in this business, you might encounter some problems when seeking Small Business Lending. In most cases, this happens because you always look at the wrong alternatives. This article talks about top five working capital loan alternatives that you might need to consider in your small business.
If you are in any industry and find yourself in the need of Small Business Lending, you can rest assured that this is an ideal alternative since all your customers pay your invoices in one month. However, you might have those repeat clients who usually take a long period to pay their invoices. Unfortunately, slow payments might affect your business since you need to be paid fast for you to pay for other expenses.
However, this issue can be solved by factoring your invoices, something that will improve your cash flow instantly. Even though Invoice factoring is not a loan in a real sense, it will give you advance payment in case your clients delay in paying their invoice. The advance will in turn, improve your cash flow and offers adequate working capital you require to pay for expenses necessary expenses, to take on new customers and improve your services while expanding your business.
As a small business, your cash resource is always tied to your business properties such as accounts receivable and inventory. A property based loan facility lets you fund your assets, whereby this alternative gives you a working capital to pay for business expenses and a new business investment.
The Small Business Administration has a business lending program specially meant for almost any small business. In most cases, you can secure up to 50000 US dollars, and the finances can be utilized for the majority of your business expenses. Note that microloans have a comparatively simple qualification criteria as compared to the traditional bank loan.
Conventional bank lending
Conventional bank financing can help you solve your working capital problems in various ways like obtaining a Small Business Lending or lines of credit for your business. The line of credit will provide a complete flexibility at an affordable rate. The only drawback with bank small business lending solutions is that getting approved for the loan is relatively hard, particularly for a startup business.
For your business to qualify for a traditional bank small business lending, your business must exhibit a track record of growth, clean financial statements, a sound management crew and significant assets. If your company meets all these prerequisites, bank lending is always the most cost-friendly solution to solve your working capital problems.
Merchant cash advance
A merchant cash advance is usually based on your future credit and debit card sales. The advance obtained is paid back on a daily basis as a portion of your credit card sales. Thus, if your credit card sales are high, your loan is settled faster. This is considered the fastest and easiest solution for your working capital needs.