You know that you need capital to thrive in the business world, but you might be confused when it comes to working capital loans. If so, you aren’t alone. This concept is difficult for many business owners to understand.
First, you need to understand working capital. Then, you’ll be ready to understand working capital loans.
In order to determine your working capital, you need to look at your current assets and your liabilities. Your current assets refer to the most liquid assets that you have, while your liabilities are your financial obligations that you have to pay within the year.
Subtract your liabilities from your assets to get your working capital.
For instance, let’s say that your current assets equal $20,000 and your current liabilities equal $5,000. You would have a working capital of $15,000. This is the money that you can use to run your business. That includes paying employees, ordering equipment, and paying your utilities. You’ll use the money for the day-to-day costs of running your company.
If you’re like most companies, you don’t have a large amount of working capital, which makes it impossible to handle your day-to-day operations. You can fix the problem by taking out a working capital loan.
First, though, you need to determine your working capital requirement. That way, you’ll get the amount of capital that you need for your business.What’s Your Working Capital Requirement?
Your working capital requirement refers to the amount of working capital that you need to cover your costs. You need to know your working capital requirement in order to determine how much money to borrow.
Instead of just looking at your liquid assets versus your liabilities, you need to analyze the operating cycle. Look at the inventory, accounts payable, and accounts receivable for the operating cycle to determine your current working capital requirement. That way, you’ll understand exactly how much you need at any given time.
It’s important to understand that your working capital requirement can change from one operating cycle to the next, so you might have to take out additional loans to cover the costs. This is normal, as most businesses don’t have the same costs from one month to the next. Costs change, so working capital requirements change, as well.Covering the Gap with a Working Capital Loan
Once you determine how much working capital you need, you’ll be ready to apply for a working capital loan. These flexible loans are available on a short-term basis to cover the amount of working capital that you need. You can use the excess money to handle your daily operation costs.
Then, once you repay your loan, you can reassess your needs and determine if you need to take out an additional loan. Many companies go from one loan to the next in order to have enough capital on hand at all times.Working Capital Loans – Your Options
If you want to meet your working capital requirement, you have many options. Equity and lines of credit are both solid options, but many small businesses elect to go with a factoring company. This provides easy access to working capital, regardless of the business owner’s credit.
Factoring companies buy invoices from your account receivables and collect on them. If you have many invoices out, you can get a good amount of money with this option.
As good as basic factoring is, 48 Factoring takes it a step further by loaning money based on future projections, as well. We use our 800-point system to determine if you qualify for these funds, and, if so, how much money you qualify for. This system means you can even get working capital if you have bad credit. We look at your company’s overall health instead of just analyzing your credit score.
By looking at the future, we provide additional options to help your meet your working capital requirements. Being able to cash in on money that will be coming in is a great way to keep your company flush with cash, even when your assets don’t outweigh your liabilities.Applying for a Working Capital Loan
Applying for a working capital funding is easy with 48 Factoring. Start the process by filling out the quick online application. Once it’s submitted, we’ll review it, give you a call to talk about it, and then assess it. You’ll find out if you qualify in as little as two days. If you qualify, we’ll wire the money to your bank account the same day so you can start growing your business and meeting your operating demands. Meeting your working capital requirement will make it much easier for you to do business.
Get started today so you can be flush with cash in as little as two days.