What is a Working Capital Loan?

A short-term loan that is used to finance day-to-day business operations such as managing payroll, stocking inventory, manufacturing products, paying debts, and so on can be termed as working capital loan.

A working capital loan can only be used to cover everyday business expenses, and cannot be utilized towards funding real estate purchases or investing in long-term assets.

How a Working Capital Loan Can Work for You

Working capital loans help cover day-to-day business expenses if your business is lacking cash flow or in need of extra funds to expand. Designed for short-term business needs, a working capital loan helps you sustain business activities on a daily basis to help you plan for long-term success.

Having cash on hand helps cover the everyday fluctuations of your business and provides peace of mind when businesses experience cash flow gaps or have unexpected expenses. Unpredictable revenue streams, seasonal sales lulls, or equipment breakdowns can all cause disruptions in working capital. Alternatively, increases in demand or opportunities for expansion can be reasons for increasing your cash reserves to plan for your business’s long-term success. Here are some ways in which working capital loans can help your small business:

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Hire More Staff

  • Hire new employees to support your business growth
  • Make sure payroll is covered so your workers are paid on time

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Finance Equipment

  • Replace outdated equipment with newer models for your business
  • Cover the cost of equipment maintenance or repairs

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Add Inventory

  • Introduce new items, product lines, or services to drive revenue for your business
  • Stock more best-selling items during your peak sales seasons

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Manage Cash Flow

  • Maintain daily operations even through gaps in cash flow
  • Continue running your business seamlessly during seasonal lulls

How to Get a Working Capital Loan

The first step towards getting a working capital loan is to understand your company’s short-term business capital needs. You must figure out if you need money to hire skilled employees, or manage existing debt, or pay vendors for inventory.

The next step is to research lenders that specialize in working capital loans for small businesses. Understand what are loan qualification criteria and loan application process of each lender. Most banks, traditional lenders, as well as alternative lenders might require you to put down collateral to secure the loan. If you are just starting your business, or have a poor credit score, you might have to look for lenders that specialize in bad credit loans.

Gather all your financial & business documents such as income tax returns, business income statement, business plan, and other such reports. When you submit the loan application, don’t forget to attach all these financial documents for lender’s assessment.

Once the lender approves your working capital loan application, read the terms and conditions of the loan before accepting the loan. Compare the interest rate, loan duration, and repayment frequency with other lenders in the market. Don’t hesitate to negotiate on loan terms if the lender is flexible.

How Does a Working Capital Loan Work?

When business owners apply for a working capital loan, the lender examines their personal & business credit score along with their financial statements. Based on the lender’s loan qualification criteria, the application can be approved or rejected.

Once the application is approved and the loan terms are laid out, the business receives the working capital loan either as a lump sum amount or a revolving credit depending on the lender. Remember that working capital loans are essentially short term loans so they need to be repaid within 12 to 18 months in general (depending on the loan agreement). The payment frequency can be daily or weekly as per terms printed on the loan document.

Here’s how working capital loans work with Funding Gate Capital:

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Fast & Easy Application Process

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Helpful Loan Guidance

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Quick Decision, Fast Funding

Working Capital Loans for Various Industries

Whether you’re a contractor or run a retail shop, you’ve probably experienced a short-term need for small business capital. A healthy cash flow lets you pay for expenses and take advantage of new business opportunities. Funding Gate Capital has experience providing working capital loans for small business owners for almost every type of industry.
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Commercial Trucking Business Loans

Fuel your trucking business with loans tailored for truck companies

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Agriculture Business Loans

Grow your farming business to its fullest potential with small business loans

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Construction Business Loans

Build your business to reach great heights with loans from Funding Gate Capital

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Restaurant Loans

Serve your customers better with loans that serve your business

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Gym & Fitness Center Business Loans

Serve your customers better with loans that serve your business

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Beauty & Wellness Business Loans

Give your business the best makeover with small business loans

FAQ: Working Capital Loans

Finding the cash your business needs to pay bills or take on the competition isn’t always straightforward. Like most business owners, you probably have questions about loans and financing options. We put together some of the most common questions about working capital loans to help you get the answers you need.

Many small business owners assume getting capital loans is a long, drawn-out process. Luckily, it doesn’t have to be that way! Alternative lenders like Funding Gate Capital provide loans for businesses with easy online applications and quick response times. In fact, you could see your loan application approved in as little as 24 hours.

Most definitions of working capital include cash. This is because business capital is your current assets minus your current liabilities. Cash, like the money you get from a loan, plays an important role in running the current operations of your business.

Your business’ cash reserves and assets can give you a great snapshot of how well you are using business resources. If your business has a lot of assets, including cash, inventory, and accounts receivable, with only a few liabilities, your business is probably in a good place financially. Sometimes, however, you have to wait for a customer to pay an invoice or you need to purchase new inventory and don’t have the cash. That’s where financing solutions can help your business bridge the gap between cash on hand and expected receivables.

It might sound counterintuitive, but securing a business loan while sales are up could be a smart move financially. Your working capital loan can be used for more than just overdue bills. For example, your restaurant is packed every night, and you have to turn customers away because you’re too busy. You decide to move to a new location but to afford the new spot, you’ll need extra cash. You could use a loan to help cover the costs of the move, including hiring more servers and installing kitchen equipment. At any point, allow our trustworthy lenders to help you obtain a working capital loan — even if your business is doing well.

A term loan is a long-term loan for funding large capital assets. Working capital is meant to provide you with funding to cover everyday business expenses and operations during a slow season or tight time, while a term loan is used for a longer amount of time and may be planned further in advance. This contrasts with working capital loans which are borrowed for a shorter term and are for operational costs rather than investing in capital assets.

You can apply for a working capital loan by filling out an application form with basic financial information about your business. Apply for working capital business loan online from Fundunf Gate Capital today.

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