Working capital is the cash kept aside by any business to cater for day-to-day expenses that may arise and to ensure that a business runs smoothly. We can say that working capital is the bloodline of any business; be it at the corporate level or small startup business. Without a working capital, it is very hard for a business to expand and this is where business owners look for alternatives to fund their businesses.
It may seem like a good idea to use your pocket money to fund the working capital in your business but in the long run, this is not the case. Instead, it is better to approach a lending company for a working capital loan which means you will have enough float money to cater for your business’ expenses and for your own personal use and still have some to spare.
Here, we take a look at some of the top benefits of working capital loans and how you can maximize on them to ensure that your business becomes a success.
Maintain a high credit score
When you have enough working capital at hand it means that you have money to pay your bills on time and avoid circumstances that can lead to filing for bankruptcy. If you are late in your monthly payments this reflects on your financial history and this lowers your credit score which means that when you approach lending companies for loans they end up charging you higher interest rates. A working capital ensures that you always have enough to avoid such incidences.
Retain your company’s ownership
Taking up funding from an equity investor means that you will give up part of your shares and so you do not have full control over the operations of your company. It may seem like a good idea initially but then you lose a part of what you have worked hard for. A working capital loan ensures that you have enough to run your business and pay your loans on time without any external interference.
Get unsecured loans
Working capital loans come in two forms, secured and unsecured loans. Unsecured working capital loans are mostly given to small businesses who maintain a good credit score throughout their operations. An unsecured business loan means that you don’t have to put up any collateral but then again you will have to pay the loan as agreed to avoid the lender coming after you.
Fast and easy to apply
Every business comes to a situation that they need cash in a short term but money may be tied up with clients due to economic changes. Working capital loans save you time and effort unlike other sources of funding where you need to plan months ahead. Working capital loans usually take a short time to approve and you can have the cash in a week’s time from the day of application. It also means that in the case of promotional sales from suppliers you can get yourself stock from these once in a lifetime offers.
No restrictions on how to use the money
Banks and lending companies do not follow up on working capital loans to see what you will do with the money. This means that you can use it however you like. However, a smart businessman will ensure that he uses it to grow his business and not divert the cash to ventures that will not give him a return.