Working capital loans can be issued by banks or alternative lenders and their purpose is to cover the short-term needs of a small business. It can temporarily increase cash flow, until revenue streams become more steady and consistent. Most companies that look for working capital loans need them for such expenses as rent, debt payments, wages, inventory, or sales and marketing expenses. Even if your business assets are greater than your liabilities, you may not have the working capital you need, because many assets are not liquid, and cannot be easily converted into cash. Here’s how a working capital loan can help you meet the needs of your small business.

Using a working capital loan

Generally speaking, a working capital loan is used to cover some kind of shortfall in cash flow, and it can be used for almost any purpose whatsoever. One common use for working capital is to purchase additional raw materials from your suppliers, in order to fill an unusually large order. You might also secure such a loan when an opportunity arises to get a significant discount on raw materials by purchasing in volume. When cash flow is lacking, you might need a working capital loan to pay your employees or to manage monthly expenses like utility bills, facility rent, or vendor payments. 

It would not be advisable to use a working capital loan for long-term purposes, such as financing equipment or buying capital assets. These things can be obtained by applying for a different kind of loan that would offer more advantageous long-term interest rates and financing. When securing a working capital loan, you will probably need to use business assets as collateral, since unsecured working capital loans will require that you have a very high credit rating. 

Need a working capital loan?

If your business is in serious need of more working capital, we may be able to provide the financial assistance you need. Contact us at My Commercial Capital so our financial specialists can work with you to determine your eligibility for funding.