Every business needs funds to operate, thrive, and grow. But sometimes, there isn’t enough available cash on hand. Frequently, in these cases, businesses look for working capital loans to fund day-to-day business expenses including rent, payroll, restocking inventory, making debt payments, paying for other operating expenses, and managing occasional cash flow gaps.
Types of Working Capital Loans
Here are three common types of working capital loans:
Term loans
These loans are secured from a bank, credit union, online lender, or other financial institution. Term loans must be repaid over a defined period which can range from a few months to many years, with an established interest rate.
SBA loans
SBA loans are provided by partnering institutions of the Small Business Administration and the loans are backed by the SBA. These loan types include SBA 7(a) loans, CAPLInes, which are used for short-term or seasonal business needs, and SBA Microloans, used for small businesses to get started or to expand.
Invoice Factoring
This type of financing involves selling the business’ invoices to a third-party factoring company. A fee is charged and a portion of the outstanding balance of the invoices is remitted to the company. The factoring organization collects the invoices.
How to Compare Working Capital Loans
Use these factors to compare loan options that may be available to you:
Determine how you want to receive the funds, either as a lump sum or on an as-needed basis.
Evaluate the repayment terms, interest rate, and repayment flexibility.
Understand and examine all loan fees.
Evaluate each lender’s customer support practices and options.
How to Get Working Capital Loans
First, determine how much funding you will need and for what purposes.
Second, check your personal and business credit scores.
Third, gather the required documentation.
Fourth, submit a formal loan application.
Seek Expert Financial Assistance
Contact Capital Finance Partners, your premier source for growth capital solutions. We provide access to a diverse range of financial solutions for small and medium-sized businesses.
