Do you know what your company’s operating capital is? Simply put, it’s the amount of money and other liquid assets you have available for your daily business expenses. If you need to increase your capital so that you can operate more efficiently, you may want to consider one of several types of loans.
Traditional Bank Loans
A traditional loan from a bank or similar lender may be short or long term. These lump sum loans or revolving lines of credit usually require monthly payments and have varying interest rates depending on the type of loan. Traditional loans are some of the hardest to be approved for but also hold some of the lowest interest rates at 10 percent or less. This type of financing can take anywhere from 1-7 years to repay.
Asset-based loans allow you to use your company’s high-end equipment, large inventory or other assets to create operating capital. An asset-based lender mostly looks at the assets you’re offering as collateral but will also look at your company’s overall financial health before determining funding for you. These financing options have interest rates of up to 8 percent and can take 7-25 years to repay.
SBA loans are also available through traditional lenders but have guidelines provided by the Small Business Administration. SBA loans are categorized into 7(a) or 504 loans, but 7(a) are the most common and provide funding of up to $5 million. SBA financing can take as little as 10 days, has interest rates ranging from 6-8 percent and allow you to take up to 25 years to repay them in some cases.
Cash Advance Loans
If you don’t have a lot of equity now but bring in revenue via credit card sales, you might consider a merchant cash advance. Lenders of this type of financing provide you with a lump sum and allow you to repay a percentage back via each credit card transaction you complete. This is an excellent choice for people who only want to pay what they know they can afford and who need funding in as little as a few days. It is an excellent choice for business owners with low FICO scores as well.
Alternative Loan Options
Alternative funding is the best option for business owners who do not have excellent personal or business credit. This financing usually requires a shorter application and can provide funding more quickly, but it also holds interest rates of up to 25 percent and only allowed up to five years for repayment. For this reason, most companies consider it a last resort.
Now that you know the different ways to acquire operating capital, it’s just a matter of finding the right lender. Search for an established and licensed company for the best results.