Blog

Working Capital Loan: What Does it Mean to You?

by

It’s not uncommon for small businesses to find themselves in a dire situation when they lack sufficient funds to continue their business and daily functions. Luckily enough, a working capital loan helps those who need to purchase operational activities without risking your liquid assets. We care about all types of businesses in their success and offer several types of loans to support business owners like you. You may be wondering what exactly a working capital loan is and what it means to you and your business, throughout the blog we will overview the highlights of the capital loan and how it may save your business.

What is a Working Capital Loan

As previously said, working capital represents a type of loan to either small, medium, and large businesses who are in need of money to cover certain expenses. Whether it may be electricity expenses to short-term financial payments, working capital loan serves to help businesses strive in their market without the anxiety of overdue payments.

One common misconception about a working capital loan is it covers all long term assets and future investments. In truth, this loan only supports day to day operations and to overall, assists your business in its financial function. Fortunately, this loan does offer a low-interest rate so you can avoid another financial dilemma and begin financing your long term assets.

In order to decipher how much capital loan is needed to cover the rest of your expenses; all businesses require calculating a working capital ratio. The calculation is simple as is since a business will only have to calculate current assets divided by current liabilities. If your ratio is below a 1.2 then it’s time to consider reapportioning your budget and taking out a loan, but if it's greater than 2.0 then your business is right on track and all financial outlets are evened out.

Pros

 As a small business, it’s important to be informed on the beneficial factors to being financed by another loan. Earlier in the blog we mentioned the perk of low interest rate compared to other loans with high interest rates, but, capital loans offer other benefits as well.

  • No Collateral Required: Unlike other financial loans, working capital offers businesses the financial benefit of relief from expenses while no requirement for collateral. It’s understood the financial responsibility you must uphold and it may seem more difficult to provide collateral along the way, luckily, you won’t need to abide by these certain loans and instead focus on a steady low interest rate.
  • Immediate Loan: While other loans take weeks to months for approval, working capital provides an efficient process for those who seek financial assistance immediately. No longer worry about a tedious approval process and attain the appropriate amount of funding to continue your business.

 Cons

 As it is important to inform yourself of the beneficial factors to a loan, it is also dire to understand the financial risks.

  • Repayment Timeline: Just as you are able to take out a loan immediately, you are also liable to pay back the loan in a fast manner. Payments are low-interest rate but require immediate deposits.
  • Possible High Interest Rate: If you have a poor credit history then you may have to pay a higher interest rate with long term payments. Generally, lenders must ensure a low-risk of repayment by instituting a higher interest rate but do offer low interest to those who have a good standing.

Grow Your Business’s Potential

 As business owners, we hunger for growth and abundant opportunities for our business. It’s time you ensure the continuation of your potential by applying for a working capital loan, so you won’t find yourself in a financial predicament. Contact us today for future endeavors and expansion to your business.

Small Business Loan: Types of Loans

by

In the state of California, we are known to be one of the most difficult states to flourish in businesses; most particularly small businesses. California may be one of the most recognized states of struggling small businesses but it’s also famously known for employing more citizens in the past few years. Small businesses generally fail after a few years, if not carefully planned and financed optimally. Join the rate of successful businesses in California by taking out the appropriate loan for you.

You may wonder which loans can help best serve your business without finding yourself stuck in an abundance of debt. Look no further, throughout this article we will go over SBA, or most famously known as small business administration loans, and detail how these loans can help your business.

What Is SBA? 

Before we list the types of SBA and benefits to the loan, it's crucial to understand what small business administration loan means and what it can do for you. As the name suggests, SBA is meant for small business loans carried out by the SBA and banks acting as the lender by distributing an amount to small businesses.

The lenders or banks guarantee flexible terms and interest rates so you may continue to grow your business without being perplexed with overriding debt. There are several types of loans a business can qualify with different pros and cons for each one.

Types of Loans 

Curious which loans you qualify and the benefits to them? SBA offers various loan programs for businesses to flourish in but we will cover the 3 most common loans a business can apply.

  1. 7a Loan Program: Most commonly used, the 7(a) loan guarantees a term loan of up to $5 million. This loan can be used for either working capital, to refinance debt, buy a business, real estate, or equipment financing. Since they do offer a high working capital to businesses, there are more restrictions corresponding with the loan. Luckily, they do offer a long repayment with low interest rates to make your financial responsibilities affordable.
  2. 504 Loan Program: This type of loan is generally meant for those who wish to purchase or improve fixed assets. Fixed assets may include purchasing land, machinery, facilities, etc. Instead of one lender funding these projects, this type of loan requires two lenders, either one from a bank or traditional lender. The loan itself does not cover the entire fund but, instead, covers a majority while the borrower must include collateral damage for the rest.
  3. Microloan Program: While the other two loans are backed by traditional lenders or banks, microloan is supported by non-profit organizations who lend their finances to other small businesses. These funds cover working capital, inventory, equipment, business start-up, etc. Their maximum principle is about $35,000 with a term of 6 years while interest rates range from 8%-13%.

Want More Information? 

Businesses are requiring more funds as regulations and daily operations eat a large part of their financial stake. Let us assist you in this important financial time and help you relish in success. Contact us now for more information on small business administration loans and see which best suits your needs.