Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources

Working capital is the money your business needs to function on a daily and short-term basis. The amount of working capital you have consists of the cash on hand to make purchases and fund necessary expenses. It is measured as your current assets minus your current liabilities. When the liabilities are greater than the assets things can get scary. Working capital loans are designed to help small businesses cope with these gaps. While they can be helpful, as with any type of loan there are both benefits and disadvantages of working capital loans.

Pros
There are several great advantages to these short-term loans. First they are quick to obtain. Since working capital is about feeding the daily needs of your business, sometimes you need a loan fast. Loan funds can typically be disbursed within a week of application and approval. Second, there no collateral is required. That means you will not have to risk losing your own home or maybe precious business equipment if you can’t repay the loan on time. Also, working capital loans allow you to use the money however you like. Standard bank loans often have restrictions on how you use their funds, but with these loans there are no strings attached. Working capital loans are also short-term loans which means they are meant to be repaid quickly and not cause you years of monthly payments.

Cons
There are some risks and disadvantages to consider. As with any loan, there are consequences if you do not repay. Even if you go into bankruptcy, working capital lenders will have claim on equity in your company in order to be repaid. Also, these loans come with higher interest rates than traditional small business loans. They are riskier for the lender because they do not require collateral and the lender passes that risk on to you in the form of higher borrowing costs. Another potential downside is that if you continually take out short-term working capital loans your credit score could suffer. The more you borrow, the more it will be affected, not to mention the damage that could be done if you are late on any payments.

Working capital is an essential part of every business and in order to keep it flowing, loans are sometimes needed. After weighing all the options, a working capital loan may be the right solution for your business.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources