Working Capital Financing

This working capital is the cash available to the business that enables it to run its day to day affairs, it is sometimes referred to as operating capital. The true definition of working capital is typically the total amount of assets a business has minus the total amount of liabilities, and this formula is what most financial services organisations will use to determine working capital loan requirements. This formula will also influence any working capital loan terms that may be agreed upon

A few advantages of a business cash advance over a working capital loan are as follows:

• Application for a business cash advance takes minutes but application for working capital loans for small business can take some time.
• No security or business plan is required for a business cash advance but businesses seeking quick working capital loans may be required to provide a business plan and security.
• Approval for a business cash advance is usually within 24 hours but owners looking for working capital loans for small business have been known to wait for weeks to get approval.
• To get a working capital loan for a new business is a cumbersome process but 365 business finance have a 90% approval rate.

One of the biggest challenges facing smaller businesses today is access to working capital. An ever-changing economic environment has meant that businesses must develop and expand to remain competitive but investing in resource and infrastructure can sometimes leave a business exposed and cash flow tight day to day.

There are different kinds of working capital loans for small business, and business owners will need to assess the exact financial requirement and ensure that any working capital loan agreement that they enter is flexible and does not put the business under any further financial pressure. Unexpected costs such as tax bills, vehicle or machinery failure or recruitment bills can impact on the cash available and negatively affect the working capital position of the business, in these circumstances a loan or cash advance can be hugely valuable.

Like most loans, working capital loan interest rates can be quite high and so it’s important that small business owners investigate thoroughly the various types of working capital loans on the market.

A good alternative to a working capital business loan is a business cash advance; its approval and funding times are as quick as working capital loans, but the repayment schedule is far more flexible as the amount funded is only prepaid when the business is paid by its customers. A merchant cash advance mirrors the cash flow of business, it has no APRs or fixed terms, and repayments mirror the transactional activity going through a business debit and credit card machines. If a business is having a good month more is paid back, and if a business is having a slower month the advance repayment is less. A small business need not be concerned with high fixed loan repayments at times when cash is tight.

Does your business need a traditional loan alternative?

A business cash advance offers the following benefits to businesses searching for working capital loans due to the fact they have bad credit.

Agree one, upfront all-inclusive cost that never changes.

• Funding in days
• One simple all-inclusive cost
• No fixed term or fixed monthly payments
• No admin fees
• No APRs
• A dedicated relationship manager
• A simple requirement that the business has been trading for 6 months
• A requirement that the business transacts £10,000 through its credit and debit card terminal.

Seasonal fluctuations and temporary dips in incoming revenue may require that the business seek out funding to help it overcome a tight period. It is important that in these circumstances flexible, fast finance is available that does not put the business under any further financial strain.

High interest rates and longer-term loans that have inflexible repayment terms may at first seem like a positive solution, but on closer inspection, its products like these that can inhibit the growth and performance of a business by putting even further pressure and strain on cash flow.

Predictable borrowing is something offered by a working capital loan, the cost of borrowing should scale with the amount of capital drawn down from the loan. If the business has no requirement for finance in a given month it need not draw on the capital available and in so doing would not incur further interest charges. Borrowing costs are therefore kept to a minimum and there is no unnecessary additional expense to the business. A business can, however, operate with confidence knowing that a line of credit is available should they require it.