There are many different types of working capital loans, such as short-term working capital loans, government-insured loans and lines of credit. If you’re looking for funds to improve and maintain your operating capital, you need to decide which option best aligns with your particular needs.
To do so, it’s important to understand that the foundation of each working capital loan stems from a different loan type.
Short-term working capital loans give you the ability to run your business without disruption.
Short-term business loans provide working capital for companies navigating obstacles, like sudden cash flow emergencies. They also can enable you to embrace exciting revenue opportunities.
This type of working capital loan usually ranges from 3 to 18 months and is repaid in daily or weekly increments.
SBA loans are partially guaranteed by the Small Business Administration (SBA) and provide access to working capital for business owners who may not meet traditional bank requirements.
SBA-backed loans decrease the risk for lenders, helping them offer some of the best working capital loan rates they can to more borrowers.
Regardless of their size, many businesses can qualify. SBA working capital loans are a preferred option for those who can obtain them.
Lines of Credit
A business line of credit (LOC) is a perfect solution for businesses with revolving working capital needs.
A line of credit allows you to withdraw only what you need up to the credit limit. You’ll pay interest only on the amount you borrow.
In short, it’s the perfect type of working capital loan for you if your funding needs are fluid.
Merchant Cash Advances
Merchant cash advances (MCAs) can provide working capital to businesses that want funding fast and don’t want to jump over hurdles to get it.
Merchant cash advances are upfront sums of capital advanced to borrowers against their business’s future sales. These are short-term financing programs and are repaid through smaller daily or weekly payments until the balance of the advance, along with any fees, are paid in full.
Out of all of the types of working capital financing products available, merchant cash advances offer the most flexible qualification requirements. Once you’re approved, funds can be placed in your account as soon as the day you apply.
If you’re looking for fast working capital loans for bad credit, MCAs are an option.
Accounts Receivable Financing
If your business is used to waiting on unpaid invoices, or typically experiences a long payment cycle, accounts receivable financing offers a solution.
Accounts receivable financing, also known as invoice financing, is an alternative to fast working capital loans. With this type of funding, you get instant access to cash that’s tied up in your accounts receivables.
By offering the full value of your future invoice payments as collateral, lenders provide you with up to 80% of the total invoice. This means you can continue to manage the costs of your business.