Funding to keep your business operations rolling
A working capital loan is a short-term loan that is taken out to facilitate the day-to-day running of everyday operations. This is to ensure the daily operational needs of a company are met. It comes under the umbrella of working capital finance.
A working capital loan can be taken out to meet costs such as rent, staff and payroll and debt repayments and other corporate debts associated with running a business. Critically, it is not used to buy long term assets or fund long term growth.
There are three main reasons why you might consider taking out a working capital loan:
Businesses who face seasonal sale cycles or who want to increase their liquidity may benefit from a working capital loan. The working capital loan can be used to meet changing requirements in operational costs and help off-set periods of low activity / sales. Alternatively, businesses can also use working capital to finance peak sales period. For example, businesses in the hospitality sector can benefit from taking out a working capital loan to meet the needs of increased staff and inventory costs during peak periods.
Working capital is essential to the daily operation of your business, as it allows you to meet your financial responsibilities with your current assets and continue to grow your business without taking on debt.
Working capital loans are short-term with shorter repayment period with options of renewing as a revolving facility. Term loans, on the other hand, can be short, medium, or long term. Their duration is usually between one to ten years, but some term loans could extend up to 30 years. Working capital loans are intended to meet short business operation requirements whilst business loans are intended to fund business expansion and capital assets
Working capital loans are usually smaller loan amounts but can have higher interest rates compared to business loans. Working capital loans also have a quicker turnaround than business loans which may require in-depth paper work and procedural compliance.
To boost available capital, SMEs can benefit from working capital finance. It can help bridge the gap or finance the difference between customer orders and supplier payments. By utilizing a loan for working capital, you release cash for business expansion without using other forms of financing to raise capital.
If your business does not show a healthy working capital, there are many business finance schemes offered which can help improve its liquidity. For example, a merchant cash advance allows you to lend a cash sum against future card transactions, while you can organize a trade finance loan to order inventory or stock from a supplier, limiting the possibility of delays to shipping orders.
Swoop works with lenders who offer loans from as little as $5,000 all the way up to $10,000,000. The amount you can borrow will depend on the strength of your business, the type of working capital loan you are looking for, what is being purchased or offered as security, and the value of the assets. Contact us to find out how much your business can borrow and what type of working capital loans is best for your current and future needs.
When applying for a working capital loan, you might have to fulfil some criteria to assess whether your business qualifies for the loan or not. Here are some criteria to keep in mind while determining whether or not your business is eligible:
As long as you can meet these requirements, finding a working capital loan that suits the needs of your business becomes a lot easier.
Swoop can assist you with other types of working capital financing as well.
Cash in hand helps you manage everyday business expenses
Helps you manage slow payers
Frees up funds for growth
Reduces stress on cashflow
Cash to help you increase your capacity, and fulfil new orders
Helps you seek new contracts
Settle suppliers’ bills promptly
Extends your buyers’ payment terms
Dedicated loans to purchase capital assets
Small, or zero upfront cost to purchase big-ticket items
Spreads the cost over time
Simplifies costs, supports cashflow, aids growth
Different loan types to suit all stages of business growth
Enables you to invest in growth and expansion
Boosts working capital
Helps you manage cashflow or debt
Strategic borrowing which keeps your assets safe
Lets you borrow without risking assets
Gives your fast access to cash
Can be used for any purpose