If You Need A Working Capital Loan, Who Do You Call?

Businesses today might have a greater need for working capital loans, more than ever. Even though it sounds like a broken record, our economy is still in the tank, and businesses aren’t as healthy as they were before. Companies today, might not have as much cash on hand, and if they have a need for working capital they will only have several options. If the funds aren’t already in the business bank account they will need to resort to either borrowing from friends or family, use company or personal credit cards, and let’s not forget applying for a working capital loan. If you already worn out all your favors with your friends and family, and if you already maxed out your credit cards, you’ll need to consider applying for a working capital loan. 

With a working capital loan, you’ll have two options on what type of facilitator you apply with. Your options will be either a bank or a private lender that specializes in short term working capital loans. Both facilitators can get you the capital your business needs, but they both have different requirements and both have their pros and cons. Depending on your business model and what the working capital will be used for, either facilitator might be better fit for your needs.

Let’s use an example of a business that want’s to buy a large piece of equipment that costs approximately $200,000. Because of the size of this transaction, most borrowers would like to have a longer term payment plan. Whether this be a lease or purchase transaction, the longer the term the more affordable the payment. Knowing this business wants a longer term, you can already assume both a bank and private funding facilitators like First Capital Business Finance can provide the financing for this business. Let’s look deeper at the example, and assume the business owner has an average credit score of 660. Knowing most banks would like to see clients with above average credit, this might be a slight hurdle to get financing with a bank. However, with a private funding facilitator the credit score wont be an issue. Our company will consider less than perfect credit. The next item that will be reviewed is the income and financial strength of the company and the business owner(s). With a bank, they will ask for a minimum of two years tax returns both personal and business, along with a financial statement for both personal and business. Where as a company like First Capital Business Finance will only review bank statements or merchant statements to get an idea on the companies cash flow health. Now some businesses are very organized and can provide all the tax returns without having issues locating them. On the other hand, some businesses doesn’t have the time to gather all those documents and would prefer a more simpler way of getting their financing approved. Another thing to consider when using tax returns to get approved, the underwriters at the bank does not want to see companies that break even at the end of the year, let alone any business that is losing at the end of the year. Most small to medium size businesses try to write off as much as they can, and if that’s the case for your business it’ll be very difficult getting approved with a bank. The next thing to consider is the terms of the loan or lease. With a bank, depending on the type of financing that is available they tend to have longer terms for their loans and leases. Whereas a company like ours will have shorter term financing. So you need to figure out which payment is the most affordable for your business, given that one of them might be lower since the term might be longer. The last item to consider is the cost of the funds. Banks are typically going to give the better pricing, given if you can jump through all their hoops and if you have the time to wait for the financing. If your business is in a rush to get financing, and you can still be profitable with a slightly higher cost, a company like ours will be the answer to your working capital needs.

 



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