A Beginner’s Guide to Working Capital Loans

Have you ever had to wait for a big invoice to be paid? Or have you received a large order, but don’t have the funds to fill it? If so, you should look into working capital loans.

The popularity and use of working capital loans is something that’s growing quickly. In fact, in just the past five years, the total number of businesses using these loans has increased by 19 percent, which has resulted in over $7 billion in small business funding in a single year. If you are interested in this type of loan, keep reading.

The Basics of Working Capital 

With a working capital loan, you can get the short-term funding you need. This is beneficial for seasonal rushes, slow seasons, emergency funding, savings, and more. Put simply, a working capital loan is a money you can use for day-to-day operations. You can begin with your liquid assets, which is the cask or other things that are easily converted to cash and subtract your obligations or liabilities that are due in the next 12 months. This is going to let you know what amount of working capital you have available.

The actual formula for this is:

Current assets – current liabilities = working capital

The working capital amount is what you have left after you have taken care of your current or immediate expenses. This is also a key indicator of the health of your business. You have the ability to pay your bills on time, pay your workers, and meet the other financial obligations that you have. However, if you don’t have funds left over, you can’t grow your business.

You can get the funds you need with a working capital loan.

Why Working Capital Loans Are a Smart Investment 

As you can see, a working capital loan provides the funds you need for continued company growth. You should take the time to find a quality loan provider, and then apply for the funding. Usually, the process to get this loan is much simpler than a traditional bank loan, and you can usually get the funds you need within a few days.

There are many businesses that use working capital loans to solve pressing or immediate issues, emergencies, and cash flow concerns. If you are looking for a solution to this type of problem, this loan is likely going to be your best bet, so be sure to keep this in mind.

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