Working Capital Loan 101: The Basics
If you’re a business owner in search of additional funding, then you’ve discovered (or will soon discover) that there’s MUCH more choice on today’s business lending landscape than in years past.
Obviously, this is good news. More choice means that instead of settling for a one-size-fits-all loan, you can focus on the best-fit solution for your needs and goals. It also means that more lenders are competing for your loyalty.
However, this flexibility and choice can be a little daunting. It’s like walking into one of those gigantic superstores that offers everything from dog food to bed linens. Yes, it’s convenient, but it can also be confusing.
To help make the research process as simple and straightforward for you as possible, today we’re spotlighting a working capital loan, which is a popular business funding solution. Here are the basics:
Working Capital Loan: Term
A working capital loan can be of any duration: from a few weeks or months, to one or several years. Typically (but not always), businesses opt for a working capital loan when they have known investments or expenses. Unexpected, temporary and/or emergency costs are often (but again, not always) covered by a revolving business line of credit.
Working Capital Loan: Amount
A working capital loan can be for under $50,000, or well over $1 million. Typically, bigger loans are associated with longer durations, since the regular repayment amount is more sustainable.
Working Capital Loan: Repayment
Working capital loans are repaid through fixed payments — often monthly, although some lenders/borrowers may negotiate other frequencies (e.g. bi-weekly). Furthermore, the loan repayment is typically withdrawn automatically from a bank account, which cuts down on administration and prevents missed payments when borrowers are busy, on vacation, etc.
Working Capital Loan: Collateral Requirements
Many lenders — including here at National Business Capital — don’t require collateral for approving working capital loans. As such, borrowers don’t need to pledge their business and/or personal assets, or undergo (and pay for) a time-consuming collateral valuation process.
Working Capital Loan: Approval Requirements
There is no standardized, industry-wide policy on working capital loan approval requirements. Some lenders have very strict policies that are like conventional bank loans. Other lenders are more flexible and, frankly, more reasonable.
For example, here at National Business Capital we approve about 90% of all working capital loan applications. This is because we don’t insist that borrowers have good credit (business and/or personal), nor do we require 2+ years of operational history. And since don’t require collateral, the application process itself rapid and streamlined. Typically, we take one day to render a decision, and upon approval we usually the requested funds available to our clients within a week.
To learn more about working capital loans, and to help determine if this is the optimal funding solution for your business, contact the National Business Capital team today!