Working capital loan funds provide your business the cash it needs to keep growing until you can cover all operating expenses out of revenue. Without a working capital loan most businesses are unable to generate enough revenue to stay afloat. These funds provide access to cash which can be used to pay rent or mortgage payments, utilities, marketing expenses, inventory, employees, etc. Obtaining capital through this method can be difficult for many businesses, so it is essential to have good business credit scores established.
Building solid business credit scores are the key to obtaining substantial working capital loan funds that can be used to grow your business. Not all types of working capital require business credit history, but it is important to have that in place. Lenders use your business credit scores just like they use personal credit scores when evaluating whether you are worthy of receiving capital. Making sure that your lines of credit help build your credit will put you in the right direction to getting the loans that your business needs to succeed.
Our Business Finance Coach takes you step-by-step through establishing your business credit scores so you get the working capital loan that you need.
There are five common types of a working capital loan. They include:
Equity: Obtained from personal resources like equity in your house, funds from friends or family members, or from angel investors.
Trade Creditor: A trade creditor will extend a loan to you so you can purchase a large quantity from their place of business. They will often check your business credit history before extending credit to you.
Factoring/Advances: You can sell future credit card receipts for instant capital if your business accepts credit cards. Another option is to sell your accounts receivable to a factoring company who handles the collection.
Line of Credit: Your business can apply for a bank line of credit, giving you the ability to borrow for short term needs. Good business credit scores will assist with your approval for a line of credit.
Short term loan: A bank can also extend credit to allow you to purchase inventory for a season. This note will typically be less than a year. Again, good established business credit scores will nearly guarantee access to this kind of funding.