Are you familiar with a working capital loan? Working capital is what you have on-hand each day for expenses that include payroll, utility bills, necessary supplies- even your rent. The formula for working capital is to subtract expenses from your assets. If you lack what is needed to cover your liabilities, you may want to consider a working capital loan. This could be a viable option for funding projects and commercial investments- here is what you should know when it comes to your working capital:
The first type of loan that is based on working capital is a term loan. In these instances, the borrower receives a single amount with repayment terms and interest predetermined. Working capital term loans are typically short-term, which may mean that you repay the loan within 18 months- or less. Some term loans may require collateral or security of some kind.
Another type of working capital loan is a line of credit. These are similar to credit cards in that you have a predetermined limit and fees based on how much you borrow. Depending on the credit line, the amount you have available to borrow is usually based on your credit rating and the amount of working capital available.
Merchant Cash Advance (MCA)
Similar still is the MCA or merchant cash advance. In this case, you can borrow money today and repay it tomorrow with your daily working capital. An MCA provides the cash you need with repayment terms focusing on a percentage of your daily revenues. This might be a prudent option for unexpected expenses that arise in your company or business.
Think a working capital loan is a right move for you? Talk to the money professionals at Capital Funding Source to learn more.