The best business loans when you need fast financing
Whether you own an established small business or are just starting out, you may be wondering what the best loans for working capital are and where to find them. Often, small businesses employ many types of financing products to pursue new opportunities or to endure a period of uncertainty. The options range from commercial real estate mortgages to equipment financing, and from asset-based lending (ABL) to secured bank loans and lines of credit. While they all are great resources for businesses, they can sometimes be difficult to get and often require the business owner to pledge collateral.
Working capital financing, in contrast, isn’t collateralized against a specific asset. This is to the benefit of many small businesses; they often don’t have assets that can be used as security. For these businesses, an uncollateralized loan, what most banks call an “unsecured” liability, is the perfect solution.
Alternative lenders have different perspectives on these types of loans. They understand the risk and implements its own policies, including rules about rates and borrowing limits. Whether you’re looking to scale your business or simply cover daily operational expenses, alternative lenders provide the best loans for working capital through flexibility and ease of application – getting you the working capital you need, fast.
What Characterizes Working Capital Loans?
Besides the lack of required collateral, working capital financing has a couple of other unique characteristics. These are outlined below:
Small business loans for working capital are typically used to source inventory, hire employees, fund a building expansion, or pay off an emergency expense. For example, if you own a seasonal business, you may need more inventory and employees in November than in March. Working capital financing helps you meet a short-term need—with long-term benefits. If you have inventory and salespeople, you can complete more sales and keep customers happy.
Other times, you need working capital for a small building project. It could be as simple as funding a new HVAC unit. Then again, it could be you need to knock down a wall to create more working space for employees.
Emergency expenses are just that: emergencies. When a machine on the manufacturing floor breaks down, you have to pay the repair and/or replacement costs. It’s critical equipment. The longer it’s out of commission, the more of a detrimental effect it will have on employee productivity and output. In that situation, you absolutely need working capital financing. There are no ifs, ands, or buts about it.
2.Amount and Duration
When you apply for working capital, you can expect to receive funding anywhere from $5,000 to over $500,000. Be smart; you should do some calculations based on expenses and expected revenue to ask for the exact amount your business needs to positively impact your business.
Some working capital loans may have shorter terms than standard bank loans, with terms of four to 18 months. That isn’t a rule set in stone. Some alternative lenders offer terms up to three years.
Most working capital loans require you to make daily or weekly payments, although some may offer monthly repayment terms. The benefit with day-to-day payments is that it makes cash flow management easier. You can spread the payment out over the course of 30 days rather than prepare all month long for a big, single expense.
Fast business loans available
There are a variety of financing products available to you that provide the speed and flexibility your company needs. Below, you can find the best loans for working capital:
- Term loan: A term loan is issued to borrowers in one lump sum and is then paid back on a daily, weekly or monthly basis depending on the term agreement. Typically, a term loan has lower rates than other financing options, but this may vary depending upon whether you choose a short-term or long-term loan.
- Line of credit: A line of credit is a flexible lending option that provides your company with access to capital on a need-to basis. Once your company has been approved for a set amount, you have the ability to draw from it whenever it’s necessary. This option provides you with the utmost flexibility when it comes to financing. Whether it’s helping with payroll, or upscaling your company’s office spaces, obtaining a line of credit may be the best option for you.
- Business credit card: Similar to a personal credit card, a business credit card provides small businesses with the ability to make purchases and payments using a line of credit that’s easily accessed from a credit card.
Business Loan Requirements
In looking to secure the funds you need for your business, lenders are typically interested in three primary factors. You will need to share your credit score, time in business, as well as your monthly or annual revenue reports. Additionally, lenders are looking for you to provide basic information about your business such as providing your company name, address, how many employees you have and where your business operates. Have this information handy when you go to apply and be prepared to answer the following questions:
- How do you intend to use the working capital?
- How much funding do you need?
When it comes to loan eligibility, understanding a lender’s requirements before you apply can help set you up for success. While you might think that you need to have a perfect credit score and a high annual income to qualify for a small business loan, the truth is, there’s no one-size-fits-all criteria. Many alternative lenders take a number of factors into consideration prior to making a loan approval decision. So, if your credit score is low, or if you’re in the early stages of business, you still have a chance to qualify for the working capital you need.
Use of working capital
If you’re looking to increase your company’s existing capital to curb seasonal slow-downs or take the next step in your business plan, you may need to pursue a working capital loan. Depending on your business and industry, there are a variety of reasons why you might consider a working capital loan. Here are a few examples of what small business financing can be used for:
- New business opportunities:There may be times when kickstarting new project requires upfront costs that exceed the initial project budget. Ensuring the project is successful means making sure the project is done right. Acquiring a working capital loan will give you the ability to cover the necessary expenses without having to repay the loan over the course of several months or years.
- Seasonal fluctuations:Many seasonal businesses sometimes borrow to get through the slower business months. Keeping the doors open requires sufficient cash-flow a working capital loan can provide.
- Payroll:Retaining talent is a key competitive differentiator. A company’s ability to hold its talent profoundly impacts the company’s ability to be operationally excellent without having the hassle of recruiting, hiring, and training new talent. A small business loan could be a good solution for ensuring payroll is covered even when you experience a lull in business.
- Emergency repairs:It’s not uncommon that machinery fails or needs to be serviced. When equipment is necessary to the daily operation of your business, you can’t afford to wait. A working capital loan can help get operations moving again without having a long-term repayment obligation.
Common Business Loans FAQ
Can I get a working capital loan with bad credit?
While the majority of small business lenders use credit score as a substantial factor when considering application approval, alternative lenders take the overall performance of the business into account by looking at business revenue, time in business, and accounts receivable.
Where do I get a fast working capital loan?
Working capital loans are available from both alternative lenders and traditional banks and credit unions. You might consider a more traditional approach if you have a well-established business with robust collateral and strong credit. Alternative lenders provide a bit more flexibility by looking at your business as a whole, reviewing more than just your credit score during the application process.
Whether you’re looking to scale your business or cover daily operational expenses, the best loans for working capital provide you with the ability to come up with the working capital you need when you need it most.
If you have any questions or would like to speak with a business advisor about small business loans and other financing options, please call one of our small business advisors at Rapid Finance today: (877)-252-0827.