Small businesses really need a helping hand in these difficult financial times. With more and more people losing their jobs, those who take initiative and are running a small business should be supported and applauded. But what does this all have to do with working capital? Basically, the financial needs that any business has on a day to day basis – this translates into the investment that is needed to keep a business working – is what is known as “working capital”. In financial terms, it is the assets a business currently holds, take away the liabilities that this business has. That is the daily cash flow that is needed and includes such things as personnel costs, insurance, utilities and so on. It measures not just how efficient a company is, but also how good its short term financial health is.
Working Capital Issues For Small Businesses
Large businesses have always had many options available to them when it comes to having and maintaining a good working capital position. They have the ability to go through such things as stock selling, inventory maintenance, accounts receivable financing and the issuing of bonds. These are all great ways to raise capital when it is necessary. For small businesses, however, it is difficult to have good levels of working capital and the cash flow is not regular enough to maintain it. Very often, their liabilities far exceed their assets. Without managing this the right way, small businesses may struggle to pay their creditors, which in turn can lead to bankruptcy. Luckily, loans are available and they provide a great solution for small businesses. These types of loans allow for rapid growth in a business. They are not generally targeted at buying assets or investments, but are used to clear up financial responsibilities such as wages, credits, accounts payable and business obligations. Very often, a small business for example, will pay their debts and then have an issue with incoming cash, meaning they struggle to pay their staff’s wages. The staff would then in turn, refuse to continue to work which means the income of a small business comes to a halt. Working capital loans are designed to stop these types of things from happening, rather than enlarging and increasing the business itself.
Working Capital Loans
If finances in a small business are not properly managed, the risk of the business failing is greatly magnified. They will be unable to grow and achieve higher profits, as well as having to pass up on some potentially amazing opportunities. The saying is that you need to spend money to make money, but sometimes that simply isn’t possible. The loans that are available to assist small business with these type of problems generally mature after one year. This means that they have to be paid back in full – plus interest – within twelve months. They are designed to allow businesses to invest in other issues to help them grow, so that it should not be a problem to pay this loan back after that period of time. However, as a small business, you do need to think long and hard about whether you are simply buying a stay of execution, or whether you really just need a little bit of extra cash flow to get you back on top and ready to face the game.
Unsecured Working Capital Loans
In years gone by, it was always necessary to have good collateral in place for working capital loans. However, new loans have been developed that don’t need any security. Of course, these can be slightly hard to get and lenders will significantly scrutinize your business before agreeing to this type of financing. Your credit history, for example, is one thing that is certainly going to influence the decision as to whether or not you will be able to receive financing. Your vested interests and your perceived ability to repay are other items that are considered. You will need to provide quite a large range of financial statements from your past operations. These statements should demonstrate how hard you have worked and what amount of personal financial investment you have put into your business. Of course, the trend of your cash flow will also be looked at.
Working capital loans are very popular amongst small business owners, particularly the unsecured versions. It is also possible to apply for working capital loans that are basically a cash advance on your credit card sales and receipts. This means that you loan on what you expect to make. This is only useful if you think that the money you are borrowing will lead to larger profits, otherwise you will end up with more problems further down the line.
Getting financing for your small business doesn’t have to be as tough as you think…To apply for Working Capital and receive multiple rate quotes Click Here!