What You Need to Know About Working Capital Loans
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Different types of working capital loans How to apply for them Alternative lending options
What Are Working Capital Loans?
Monthly bills and/or debt payments Payroll Inventory Operational expenses Emergency expenses
Who Might Want a Working Capital Loan?
Restaurants Manufacturers with cyclical sales Retailers with seasonal business Building contractors Startups Businesses looking to expand
How to Calculate Working Capital
Cash (checking and savings accounts) Accounts receivable Inventory Assets soon to be paid off or liquidated (like equipment) Stocks, bonds, and mutual funds Rent Utilities Supplies Principal and interest payments on any debt Accounts payable Accrued taxes Long-term debt that will be due in the short-term
Pros and Cons of Working Capital Loans
May not require collateral (these are called unsecured loans) Can help improve cash flow Let you maintain ownership of your business (they don’t involve private investors) May involve a faster loan process than other products Offer spending flexibility with few restrictions from lenders Come in numerous types of loan products Unsecured working capital loans may require a higher credit rating Some working capital loans may have higher interest rates than other loans Working capital loans may affect your personal as well as your business credit
Types of Working Capital Loans
SBA 7(a) and 7(a) Express Loans
Lines of Credit
Merchant Cash Advances
Bank Overdraft Facility
How to Apply for a Working Capital Loan
1. Determine What the Loan Is for and How Much Capital You Need
What type of working capital do you need to cover — payroll, inventory, bills? How much money do you need? How often will you be able to make payments? What is your budget for payments? Do you have other sources of funding?
2. Decide Which Type of Capital Loan Is Right for Your Business
Short-term loan Business line of credit Invoice factoring SBA loan Merchant cash advance Inventory financing Bank overdraft facility
3. Assess What Your Business Probably Qualifies For
Your personal and business credit rating What, if any, collateral you can provide State of your business finances How long your business has been operating Whether you have positive or negative working capital
4. Choose a Lender
5. Prepare Documentation and Submit Application
Business financial records Personal and business credit reports Cash flow projections Your business plan (to show how the working capital loan will be used) Identifying information, which may include proof of your citizenship Business legal documents
6. Partner with a Lender to Secure a Capital Loan
Lenders Who Offer Working Capital Loans
Alternatives to Working Capital Loans
Find Working Capital Loans with Lantern Credit
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