Sustain Day-to-Day Business Needs
With the increased need for capital many business owners face, it’s no wonder 58% of firms are more likely to seek financing for operating expenses than other needs, according to the State of Small Business Credit Survey. In fact, the survey noted that paying operating expenses is the No. 1 financial challenge small business owners face.
Not surprisingly, this challenge leads many entrepreneurs in search of working capital loans. At Fast Capital 360, we partner with lenders throughout the country to offer you funding options that fit your business and circumstances.
What Is a Working Capital Loan?
A working capital loan is financing obtained to support a company’s daily or project-based operations.
In most cases, a working capital loan is defined by shorter terms. As such, this type of financing is not used to acquire long-term fixed assets or real estate, such as land or buildings.
How Does a Working Capital Loan for Small Business Work?
Typically, business lenders offer unsecured working capital loans, meaning they’re obtained without collateral. This is the case with Fast Capital 360. Unsecured loans allow lenders to fund fast — one of the biggest selling points of working capital financing products.
Because business working capital loans are used for short-term goals and needs, they’re often repaid in fewer than 18 months.
What Are the Different Types of Working Capital Loans?
Working capital loans is an umbrella term for many types of short-term financing. As a result, there are several different types:
When Does a Working Capital Loan Make Sense?
There are several reasons why a working capital loan might benefit your business:
Entrepreneurs often seek a business working capital loan when they need extra cash to cover an emergency. For example, to pay for equipment repairs.
If you’re in an industry where your cash flow is subject to seasonal fluctuations, such as hospitality or retail, a working capital loan could be a good option to get you through the ebbs and flows.
Do you want to take advantage of an inventory sale or make a bulk purchase? This is another reason a business working capital loan could be helpful.
Another good use of this type of financing is if you’re looking to hire additional staff or need help covering payroll costs.
Bridge Cash Gaps
Businesses often use working capital loans when they are temporarily low on funds and need to continue to support the everyday expenses of running a business. For example, if you’re waiting on invoices or large project payouts, this type of financing could be the right fit.
What Does a Working Capital Loan Cost?
At Fast Capital 360, our working capital loans have a starting interest rate of 7%. Keep in mind the amount you pay will depend on your funding amount, rate and term. You can use our business loan calculator to estimate your financing payments.
Working Capital Loan Example
Let’s say you took out a $5,000 working capital loan at an 8% interest rate. If your loan term was 6 months, using our loan calculator, your estimated monthly payment would be approximately $850. If your repayment terms were weekly instead of monthly, you’d be responsible for installment payments of roughly $215 a week.
How to Qualify for a Business Working Capital Loan
The stronger your credit history and finances, the easier it will be to qualify for a loan program (and the better terms you can expect).
What Our Lenders Evaluate
When evaluating applications, our working capital lenders consider a business’s cash flow and revenue. They do this by reviewing the most recent 4 months of business bank statements. Credit score and existing debt will also be considered.
Fast Capital 360 Minimum Qualifications
Getting a working capital loan is easier and faster than obtaining a conventional term loan.
At Fast Capital 360, borrowers who meet the following minimum criteria typically qualify:
- 6 months in business
- $200,000+ in annual revenue
- 550+ credit score
Working Capital Loans Through Fast Capital 360
How to Apply for a Fast Working Capital Loan
When you’re ready to apply for a working capital loan, we make the process fast and easy — and most importantly — you can get preapproved without impacting your credit.
All it takes is 3 steps:
- Tell us about yourself and your business
- Attach recent bank statements
- Get multiple loan offers
Once you pick the offer that works for you, your working capital loan could be funded the same day as approval.
Working Capital Loan: Frequently Asked Questions
When you’re wondering how to use a working capital loan, keep in mind that you can use a business capital loan for a number of reasons, most commonly specific to operating expenses. For example, you can pay your employees and rent during lulls or purchase inventory without depleting cash reserves. Funding a company’s everyday needs is what a working capital loan is all about.
The most significant difference between term and working capital loans is how they’re obtained. Traditional term loans typically require good credit, a proven business history, high annual revenues and may require collateral. On the other hand, small business working capital loans have lower funding amounts, process quickly and are easier to qualify for.
Another significant difference is the length of their respective terms. Business term loans can extend several years, while small business working capital loans are usually repaid in 18 months or less.
Their repayment structures differ, too. Where traditional term loans are often paid back in equal monthly installments, working capital loans often require daily or weekly payments.
- Great for immediate, short-term needs
- Easy to qualify and funding is quick
- Repaid faster than long-term loans
- Lower limits than long-term loans
- Higher interest rates than long-term loans
- More frequent payments can impact cash flow