The Benefits of Working Capital Loans

Working capital is what keeps cash flowing through your business. If you have it, you can afford to meet your expenses and even to invest in growth by funding new equipment purchases or supplies to take on bigger orders. When you don’t have it, you’re stuck scrambling to triage your outgoing expenses, even if you’re making money on paper and waiting for payment. This truth is one of the biggest challenges in business in any industry, and there is a wide range of financial products designed to help you bridge those gaps. One of them, and one of the simplest, is a loan designed to give you that capital. These loans are different from other business loans because they are designed to let you use the borrowed money flexibly, without having the funds tied to a specific asset purchase. There are other alternatives, including several kinds of cash advance and asset financing, but often a simple loan is the best choice. It all depends on your current needs because every option has its trade-offs.

Benefits of Working Capital Loans

When you apply for a loan to help your cash flow, you’re choosing an option that lets you easily access cash for short-term opportunities quickly. That’s the biggest benefit, but it’s shared by a lot of other short-term lending solutions. What else then? Well, these loans are designed to keep your cash flow steady during predictable business downturns, so they don’t require you to finance an asset you might not have at the moment, like invoices or inventory. They also don’t require you to agree to payment scenarios that require administrative shifts in your accounting department, like turning over collections to an outside source. Sometimes, you can even access the funds as an unsecured loan, without any collateral, if you’re willing to pay a little more interest.

Is There a Downside?

Any form of financing has its drawbacks. In this case, they are clear and simple. First, these loans are designed for predictable and temporary downturns when you know demand will rise again. They’re short-term by nature, so if you need a long repayment term or you’re unsure about future business, they won’t be your best fit. Even when they are secured with an asset, short-term loans are also more expensive than long-term loans or reusable asset-based credit resources. They can be less expensive than many other forms of a short-term one-time cash advance, though. That makes them perfect for the right situation, the key is to know when you’re in that situation.