What is a working capital loan?
Working capital is the available cash (current asset minus current liabilities) a business has to make day-to-day operational activities. A working capital loan would be tailored to assist businesses to cover their day-to-day operational cost like accounts payable, labour cost or raw material. The loan is not for investments, expansions or long-term asset purchase, but strictly to cover business short-term operations.
A working capital loan is usually for businesses that have high seasonality or cyclical sales cycles who regularly experience periods of very high sales activity followed by quieter periods. Businesses commonly access this type of finance during slow periods.
What is the loan term for a working capital loan?
Working capital loans are short-term with a repayment period ranging from 1 to 36 months. The loan term is tailored to every customer.
Where can I obtain a working capital loan?
Working capital loans generally come from the following lenders:
Do I need a security to secure my working capital loan?
Most of our lenders offer secured working capital loans, meaning you can get a loan with providing a security (i.e. property). Furthermore, providing a security for the loan may make you eligible for a discount rate, and quicker approval.
What documentation is required for a working capital loan?
Documentation required for a working capital loan is similar to any business loan, where you’ll be required to provide 2 years business tax return and personal tax returns. Also, if a security is offered, you are required to show proof of ownership.
What are the benefits of a working capital loan?
The funds can be used for whatever operational cost. Here are some scenario’s in which a working capital loan could help:
- Bridge receivables
- Cover unexpected bills
- Manage your cash flow
- Refresh your inventory
- Seasonal marketing campaign
At Mortgage Providers, we have access to many lenders that offer working capital loans. Our brokers know the policy differentiations of these different lenders and will ensure you will get the best possible rate. Call us to discuss your business scenario and we will be glad to help.