Why Every Small Business Owner Should Consider A Working Capital Loan

WHY EVERY SMALL BUSINESS OWNER Should Consider A WORKING CAPITAL LOAN WHAT IS A WORKING CAPITAL LOAN? A working capital loan is a short-term loan whose purpose is to finance the everyday operations of a company. It is NOT used for investments or long term assets. WHO CAN GET A WORKING CAPITAL LOAN? Both new businesses that are trying to expand and older companies looking to restructure can benefit from a working capital loan. Most businesses that make $15,000 a month or more will qualify. Even if a bank has turned down a business seeking a working capital loan, alternative lenders approve about 90% of businesses who make $15,000 or more a month, Although the personal credit score of the business owner may be looked at, the businesses' cash flow is the most important determinng factor. WHEN CAN A BUSINESS USE A WORKING CAPITAL LOAN? Anytime a business needs assistence in covering regular day-today costs, the owner should consider a working capital loan. Let's look at the example of Henry, who owns East Town Coffee; COFFEE East Town Henry's business generates great revenue during the freezing winter months when customers crave his fresh-brewed coffee and award-winning hot chocolate. However, East Town Coffee does not generate as much during the hot summer months, when Henry notices his customers enjoying ice cream across the street at Pete's Ice Cream Parlor. But the summer months are when Henry is able to get the best deal on high-quality coffee beans. So, Henry obtains a working capital loan during this time. A WORKING CAPITAL LOAN MAY BE USED TO: Fulfill Make an Make Rent Employee Payroll Inventory Purchase Payments LENDING INSTITUTIONS REPORT BUSINESSES OBTAIN LOANS FOR THE FOLLOWING REASONS: Equipment 19.02% Other Working Capital 39.59% Financing Recievables 16.71% Hiring 0.51% New or Expanding Facilities Mergers & Acquisitions 3.86% 20.31% WHO QUALIFIES FOR WORKING CAPITAL LOANS? Not every company will qualify for a working capital loan. Lenders will want the businesses to present a reasonable expectation on how they plan to repay the loan. For newer businesses, the credit history of the prinical owners may be taken into reconsideration for approval. How IS IT PAID BACK? Repayment can be made in two ways. The first option is as a small percentage of sales until the repayment is paid in full. The business will only make payments from sales made. The second option is to repay as a fixed daily Monday through Friday auto ACH draft. The small daily payment will help to stabilize cash flow and build a credit history fast. BENEFITS OF A WORKING CAPITAL LOAN: 24h Working capital loans can ofen be approved very quickly, giving business owners access Businesses can Businesses can stay afloat during slow business expand at the right moments with provided months. loan funds. to cash within a few days. Ironwood Finance Visit www.ironwoodfinance.com for more resources to help your business succeed. SOURCES http://www.forbes.com/sites/sageworks/2013/04/12/businesses-seekıng-working-capital-survey/ http//www.investopedia.com/terms/wwarkingcapitalloan asp http://www.wisegeek.com/what-is-a-working-capital-loan htm