A working capital loan can be a great way to receive a quick influx of capital for your business. Although there are a lot of loan options for small businesses, many of them require long-term payments, and the requirements are sometimes fairly demanding. For many companies, a working small capital loan is a great alternative compared to more traditional loans. Discover if your company qualifies and contact a lender to see what a working capital loan can do for your business. Here is how to qualify for working capital loans.
It shouldn’t be surprising that personal and business credit is a common consideration. An A+ credit rating (720 or above) is usually recommended. With other considerations, the credit requirement may be reduced and be less of a sticking point. However, having an excellent credit rating will always work in your favor, especially when it comes to rates.
Equity can also be used to qualify for a working capital loan. This equity could be in terms of equipment that the business owns or it could be in real estate. Depending on how much money you’re looking to borrow, you may be better off with one or the other option. In terms of equipment, you can expect to borrow up to 50 percent of the total value. For smaller loans, that may be more than adequate. If you need a larger loan, real estate may be the superior choice. When it comes to real estate, it’s typically up to 70 percent of the value. When using your equity, other considerations such as credit or sales are less important. That could be a definite plus for you and your business.
If you have significant annual sales, your sales could be what qualify your company for the working capital loan. Usually, one million or more in annual sales will be considered significant. Granted, sales figures are never guaranteed, but it gives your lender a rough gauge of your annual performance and, as such, it helps to determine how easily you may be able to pay back the loan.
Secured or Unsecured
If you have good credit and a profitable business, you should be able to qualify for an unsecured loan. As you’d expect, bad credit or losses will hurt you here. If you have poor credit and your business has been showing losses, you’ll be able to borrow significantly less money than you may have expected. You can probably expect no more than 10-20 percent of your annual revenue. Additionally, the rates will be less desirable.
When seeking a working capital line of credit in Waukesha, WI, you always have the option to go with a secured loan instead. If you can provide collateral, you’ll be able to borrow more and often at quite reasonable rates. What will work best for any given business will obviously vary, so be sure to speak with your lender about all of your available choices.
Can You Qualify for Working Capital Loans?
Eagle Business Credit, a factoring company, offers business funding to small businesses. We do not rely on a high credit score. We can fund a small business with low personal or business credit. Accounts receivable financing offers your business the necessary working capital financing to operate and grow. If you are worried about your working capital management, invoice factoring services can be a great fit among many working capital financing strategies.