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applying for a working capital loan

Facts about Working Capital Loans

Whether you’re looking to expand your business, buy new equipment, add new employees, or even cover certain bills, sometimes there just isn’t enough cash readily available to meet all your needs. Traditional loans can be a hassle to acquire, and you may not want to pay back a loan for several years. A working capital loan may be an excellent solution. For more information, and to determine if a working capital loan might be a good idea for you and your business, continue reading below for facts about working capital loans.

What Is It?

A working capital loan is a loan that can be acquired from any lender, bank, or credit agency. Unlike traditional loans, it isn’t levied against standard collateral, but is instead determined by your working capital. Your working capital is determined by comparing your business income and inventory (or anything that could be easily converted into cash) against your liabilities, such as accounts payable, wages, or any other debt. Since a working capital loan is a short-term loan (typically paid back within a year), your initial assessment will also be made against anything due within the year. The collateral options with a working capital loan tend to be very flexible, which makes qualifying for the loan relatively easy.

What Are the Benefits?

One of the benefits of a working capital loan is that you don’t have to predetermine how to spend it. This makes it a very flexible loan. Additionally, it will be paid back within a year, so it’s not an outstanding debt that will remain on the books for years to come. The initial assessment and determination can often be done in a few days, so it’s feasible that you’d have the money available to you within a week or so.

What’s the Downside?

A working capital loan will typically charge higher interest than more conventional loans. That means your payments will be higher, and you may not have the option to renegotiate the terms due to its short-term nature. However, depending upon the needs of your business, a working capital loan in Huntsville, AL, may be the perfect answer to your cash flow needs. Be sure to examine the particulars of your working capital loan before you make a final decision.