When it comes to financing a business, there are many different options for securing working capital. Some businesses operate completely based on revenue. Others get help from banks or investors. Some entrepreneurs even have enough savings to pour their own assets into their businesses until the ventures begin to turn a profit. Unfortunately, there might be instances where none of those options are workable for your business. You might have a series of customers who haven’t paid their invoices yet, leading to a temporary cash flow problem. Your business might be too young and green to attract investors or get approved for a traditional bank loan. And you might not have the savings necessary to keep your business afloat for the long-term—at least not without risking your personal financial future.
The Beauty of a Working Capital Loan
In such situations, a working capital loan could be a worthwhile solution to consider. There are online funding companies that specialize in business financing, and they will typically be much easier to work with (and much more amenable to helping businesses of all shapes and sizes) than a traditional banking institution. Small business working capital loans are precisely what they sound like: forms of financing that give your company the funds it needs to continue operating.
What makes working capital loans so great for small businesses? Here are two of the biggest reasons to consider this financial option.
- You can spend the money on virtually anything
One of the big drawbacks of traditional bank loans is that some banks will want to know precisely how you plan to spend the money. You might even have to include those details in your loan application, or at least explain them in a meeting with the bank lender. If you are planning some major expense like purchasing a new piece of equipment or renovating the office, this stipulation might not be that big of a deal. If you just need the money for day-to-day operational expenses, though, it can be irritating (and perhaps even impossible) to predict where each dollar will go. You need the same freedom to spend money that you would have when using your own money or your company’s profits.
Working capital loans are great in this regard. They are extremely versatile and can more or less be used for any operational expenses your business may encounter in the short term. From purchasing new computers for the office to restocking inventory, and from expanding your staff to getting by until your cash flow reignites, a working capital loan can be used for virtually any type of business expense.
- You need funds now
The versatility of a good working capital loan is in part related to its speed. Traditional bank loans can have exceedingly long approval times. For instance, disbursement of loans from the U.S. Small Business Administration (SBA) can take 30 to 60 days. With the right financing company, the process of getting a working capital loan approved might take just a few hours. With these loans, you could see the funds disbursed to your account within 48 hours.
This speed isn’t just far faster than what you are going to see going through the SBA. It also makes working capital loans a much better option for sudden financial difficulties. You can’t predict when your clients aren’t going to pay their invoices on time, when your equipment is going to break down, or when your business is going to be hit with a financial emergency. As such, unless your business has a crystal ball at its disposal, traditional financing isn’t going to be the answer to your most urgent and sudden financial needs. Working capital loans can be ideal solutions to such problems.
Conclusion
Don’t deal with strongly limited loans or extremely long application approval and loan disbursement times. Don’t become one of the many small businesses that traditional lending institutions turn away each year. Instead, take an alternate route and find a respected small business lender that will be able to offer you a working capital loan. You will experience a quicker application process, a better shot at approval, and a more flexible and versatile loan—all because you dodged the traditional lender.