| A working capital loan is a form of business loan that | | | | debt. |
| is commonly allocated to support the daily operations | | | | Advances or Factoring |
| of a business or buy earning assets. This source of | | | | This type of working capital loan is based on definite |
| funding is often sought when the net working capital | | | | account receivables or sales orders. In this case, |
| is deficient. This circumstance results from a low or | | | | having reputable and trustworthy clientele is vital as |
| even negative figure when the existing liabilities in the | | | | they would serves as basis in the readiness of the |
| form of accounts payable are subtracted from the | | | | lending company to raise the needed amount for |
| current asset comprising of accounts receivable and | | | | your businesses. This requires that your business be |
| inventory. | | | | equipped with credit card processing machines. |
| For most businesses, their objective in acquiring a | | | | Overdraft or Line of Credit |
| working capital loan is to make sure that the business | | | | A sound credit worthiness can help you in obtaining |
| operations are continued until such time that the cash | | | | an overdraft facility that enables you to overdraw |
| flow coming in is sufficient enough to accommodate | | | | beyond the available amount in your bank account to |
| the upcoming operational costs as well as the | | | | a maximum figure reaching your line of credit. The |
| maturing short-term debt. | | | | assessment on your credit history will determine the |
| Working capital loan is ideal for whatever business | | | | amount to be withdrawn and the payment terms. |
| situation whether an emergency crisis or pursuing a | | | | The charged interest rate for this type of working |
| new venture for development. It poses as a great | | | | capital loan generally ranges from one to two percent |
| option to come up with a quick source of funds. | | | | over the prime rate of the bank. |
| When you have already decided that a working | | | | Short-Term Loan |
| capital loan is right for you, one thing to learn about it | | | | As its name suggests, this type of working capital |
| is that different traditional financial institutions may | | | | loan has a fixed period of payment that usually lasts |
| refer to it in varying terms or it comes in different | | | | for up to one year only with a fixed interest rate. |
| forms such as: | | | | Short term loans can be secured or unsecured. |
| Equity | | | | Commonly, funds are granted against the security of |
| Funds in this form can be attained through a friend, | | | | a collateral. Some banks however may offer this |
| relative or other personally owned resource without | | | | type of financial service without any personal |
| any withstanding debt like the home equity loan. It | | | | guarantee for as long as the borrower has |
| can also come from an angel investor who would be | | | | established a good relationship and clean record with |
| providing the money needed by the business in | | | | the bank, a good credit history and a decent |
| exchange either for ownership equity or convertible | | | | reputation in the business industry he is operating in. |