Working Capital Loan
A working capital loan refers to a type of financial loan utilised by companies to fund day-to-day business operations. This loan is suitable for every nature of business such as consultancy, manufacturing, service provider and trading sectors.
Unlike most other business loans that grant companies a capital for expansion purpose, a working capital loan is strictly limited to daily/monthly a.k.a. short-term expenses and other urgent needs such as paying for accounts payable, utilities, wages and rental. The loan can also be used to cover urgent needs such as delay collection, sales drop due to seasonal factors, and funding for R&D purpose. This means a working capital loan is not suitable to be used for long-term financing term or to purchase company assets or even investments.
Benefits of Working Capital Loan
- Unlike traditional bank loans, a working capital loan usually gets approved within a week after the application is accepted. As a result, a working capital loan allows you to access quick cash when you needed the most. Best of all, you do not have to waste your precious time undergoing tedious process of heavy paperwork and lengthy waiting period.
- Whereas most business loans require you to put up collateral, you do not have to worry such a thing when you apply a working capital loan.
- The best thing about a working capital loan is that you can spend the money at your discretion.
- If you choose to obtain funds from an investor, you are likely to lose ownership over a percentage of your business in return. The loss of ownership also means you have to give up some of your decision-making powers of your business. Fortunately, such situation can be avoided if you turn to a licensed financial institution such as a bank. When you borrow from a bank, you are only obligated to make your payments on time while maintaining full control of your business.