You probably think that if you are running a successful business and properly managing its finances, you won’t need a working capital loan- but that’s not necessarily true. There is always a chance of something happening that causes your cash on hand to run out. A working capital loan can help you cover your daily expenses and get through that difficult time.
What is a Working Capital Loan?
This is a business loan that helps out when you find your business is in a tight spot. It’s not a good idea for long-term financial goals but can be very helpful in managing your short-term goals.
Interest Rates for Working Capital Loans
Before you apply for a working capital loan, you’ll want to find out about the interest rates the company is going to charge. Most of the time, your credit is what determines the interest rates that you will be offered. Often, lenders will also consider how long you have been in business and your credit scores.
You’ll want to be aware that the interest rate isn’t the only cost associated with working capital loans. There are other fees as well, such as the origination fee and sometimes filing fees.
How to Increase Working Capital
Since your primary goal in business is to make money and not take on more debt, you might want to consider some other avenues for increasing working capital before taking out a loan.
Increase your prices: this is the quickest way to make more money- but you must keep your customer in mind when you do. You want to avoid raising them too much, forcing them to buy from someone else.
Consider other revenue streams: there are plenty of other ways to make money, be creative and look for some other ways to increase your profitability.
Implement late payment fees: if you have clients that are always paying their invoices late, start adding a late fee to their account. This will either increase your income or convince clients to pay on time.
Cut back on expenses: take time to look over your budget to find out what areas you can cut back on to increase your working capital.
Is This a Good Solution for Your Business?
You are the only one that can determine if working capital loans will repair the financial situation that you have found yourself in. However, if the above suggestions didn’t work to increase your bank account, it may be something worth exploring. Contact Summit Commercial Capital today to get the working capital you need for your business.