Working Capital Loan – Business Benefits

If you've been in business for long, you clearly understand how important cash and cash flow is to the health and viability of your business. Having positive cash flow injected into your business is necessary for viability. This implies that you don’t have to rely on the sale of assets or financing to fund your operations or growth.

If your business does not have sufficient operating cash flow however, it means you’ll have a hard time maintaining operations. Fortunately, you can seek funding to cover your deficit. The most common type of funding for promoting continuity of operations and supporting growth for your business is referred to as working capital.

So, let’s define working capital

According to Accounting Coach, working capital is defined as the value of current assets excluding total liabilities. For businesses struggling to meet immediate and short-term financial needs, buffering their working capital from external sources can make all the difference when it’s time to pay employees, taxes or even hire new employees. This article highlights the benefits of working capital that business owners should be aware of.

Get Finance Without Collateral

Generally, most business loans require some form of collateral. Pledging collateral is essential to every loan application, as it is an assurance of loan commitment. Pledging, however, is not ideal as it puts your valuables and business assets at risk.

Working capital, however, comes in the form of secured loans and unsecured loans. What this means is that your business can get financing without hassles and without putting anything at risk.

However, lenders are quite selective and will only fund unsecured working capital for small businesses with a good credit history and zero risks of defaulting. 

So, if your business falls within this category, you can get working capital without pledging your assets, inventory or personal property as collateral.

Fuel Short-term Needs

Working loans are easy to secure and handy in meeting short-term finance requirements. With a working capital loan, you won't have to commit yourself or business to years of interest repayments. Instead, it can help you meet short-term needs and take advantage of flexible repayments, allowing you to plan your short-term finances.

Generally, working loans are primarily designed to serve as a means of quick cash infusion to your business and should be repaid quickly.

Exercise Discretion With Spending 

Unlike other forms of funding, working capital has few (if any) restrictions imposed on how you are to spend the money. 

Your creditor only requires you to spend the working capital on maintaining the daily operations of your enterprise, but this should not be an issue if this is what you do anyway.

Quick Funding

Conventional loan application usually takes a long time, and approval is not always guaranteed. Working capital is easy to apply for, has a quicker payout compared to other loan categories, and comes with less restrictions. In most cases, working capital is processed in less than a week following the acceptance of your application.