What Can a Working Capital Loan Do For My Small Business?
Working capital loans are a perfect way for business owners who need flexible, short-term funding to grow their business without having to make tough decisions as to how they should allocate funds. With shorter payment periods and flexible usage, Credibly’s working capital solutions provide speed, simplicity, and versatility to meet the funding needs of small businesses. Funds are automatically deposited into your business bank account with repayments already set up, so you can focus on running your company.
How to Get a Working Capital Loan
Fast, Simple Business Financing
With an online application, application review within one business day and funding delivered straight to your bank account, the Credibly experience is designed to be intuitive for business owners.
The Right Loan for YOUR Business
We design customized capital solutions to ensure your business gets the right funding type and amount for your business needs and goals.
Best-in-Class Customer Service
Credibly business experts are standing by to help you, from the first time you submit an application until you pay off your final business loan with Credibly.
Effortless Automatic Payments
Payments are automatically remitted from your bank account, so you can focus on running your business.
FAQs About Working Capital
What is working capital?
Working capital, also known as net working capital (NWC) is the money that businesses use to support day-to-day operations. As the difference between current operating assets and liabilities, working capital is a measure of a company’s liquidity, operational efficiency, financial health, and the ability to pay off its debts within a year.
Without enough working capital, a business cannot continue to operate. Maintaining healthy working capital allows you to seize an opportunity as it arises and also provides a safety net to absorb possible bad debts, stabilize cash flow, or provide emergency relief when needed.
How is working capital calculated?
The formula for calculating working capital is: Working Capital Formula = Current Assets – Current Liabilities. Basically, working capital is the difference between a firm’s current assets and current liabilities.
Current assets are the tangible and intangible items that your company owns and can be easily turned into cash within one business cycle. Along with your checking and savings account, this includes things like accounts receivable, highly liquid marketable securities, inventory, and other shorter-term prepaid expenses.
Current liabilities include all of the debts and expenses firms expect to pay within one business cycle. This typically includes all of the normal costs associated with running a business: utilities, rent, materials and supplies, interest and principal payments on debt, accounts payable, and accrued liabilities and income taxes.
Why is working capital important?
Because working capital is the money you have available to meet your short-term needs, it is critical for sustaining operations. It is also a measure of a business’s ability to pay off short-term business expenses or debts.
What is the difference between working capital and operating capital?
Operating working capital (OWC) is the measure of a business’s liquidity whereas net working capital (NWC) is the sum of all company assets minus all outstanding liabilities. Operating working capital is all assets, minus cash and securities, minus all short term, non-interest debts.
What are the four main components of working capital?
The four components of working capital are cash management, receivables management, inventory management, and accounts payable management. Investors and analysts assess these aspects of your business to evaluate a company’s cash flow.
What are the advantages of a working capital loan?
Working capital loans are short-term small business loans and designed for companies who need capital quickly. This type of financing is great for stabilizing cash flow and getting you back on your feet quickly.
- Working capital loans provide immediate assistance for companies that need extra working capital.
- Working capital loans have a variety of ways in which the funds can be used from purchasing inventory, paying employees, and even day-to-day operational needs.
- Traditional bank loans are rigid and difficult to qualify for, with a lengthy time to funding. Our working capital loans are fast, flexible, and intuitive.
Are there disadvantages of a working capital loan?
Working capital loans may not be the best option for long-term growth initiatives due to the shorter duration.
- Because working capital loans have shorter repayment terms, factor rates tend to be higher than longer-term loans.
- Unsecured loans can have higher rates, due to the associated risk for lenders. That said, not pledging collateral is often a positive rather than a negative for you as the borrower, depending on your situation.
- It can be more difficult to qualify for an unsecured loan, such as a working capital loan or business credit card, if you have a poor credit history. Secured financing options, like invoice financing, invoice factoring, or real estate loans, use collateral to offset risk for the lender and are better options for borrowers with poor business or personal credit.
Can startups get a working capital loan?
Many new businesses, or startups, struggle with cash flow and maintaining adequate working capital. However, most financial institutions have revenue requirements to qualify for their business funding options, including working capital loans. This is to protect both the lender and the borrower and ensure that the borrower has adequate sales to meet debt obligations without bankrupting the business.
However, some companies that consider themselves a startup may actually have adequate funds and credit to qualify for loans, especially from online lenders. If your balance sheet shows regular revenue of over $15,000 and you have been in business for at least six months, you may qualify for a Credibly work capital loan.
* Weekly payments for working capital loans have different minimum qualifying criteria than the daily payment option.
** $15K+ avg. deposits for a three-month average and the most recent month.
*** Rates are included in your daily payback quote to simplify repayments and account monitoring. Rates, pricing, requirements and other terms and conditions subject to change without notice.
**** Bank statements must be from the business banking account for the business receiving funds.