Introduction to Business Lending: Working Capital Loans
Normal business operations require adequate working capital loans. These forms of additional capital can come from many sources. A business loan helps companies obtain the necessary funds to operate and grow successfully.
A business loan is a debt that has conditions and terms for repayments. These can take the form of equity, debt or a combination of both. Structuring debt terms is common and may include records of accomplishment of successful operations, assets of the business, the business owner’s financial strength and many other financial factors.
Small businesses may need the right working capital loanproduct that specifically meets their goals and needs. This should include determining financial needs, the purpose of funding, abilities to repay loans and figuring out the best types of loans for individual companies.
Many small businesses require additional financial assistance for the following reasons:
1. Startups – Business startups are very expensive, often taking more time and money than owners anticipate. Anytime unexpected problems or delays arise, owners may need access to capital. Lenders can help owners determine specific capital needs, business start up timelines and a successful business plan.
2. Inventory Purchases – Small businesses generally hold minimal inventory to reduce the need for outgoing cash. As businesses grow, this can become a significant problem. To help increase inventory, companies can borrow capital to purchase products to help provide for sufficient growth. Furthermore, companies can use specialized financial planning to help manage their business loan funds.
3. Business Expansion – Growth requires additional capital. When businesses expand, offering new services or products, it can be expense and require additional capital funds. This may also require producing, delivering and training new employees. Having a lending partner that specializes in expansion and growth is a valuable asset for any growing business.
Generally, established businesses have an easier time borrowing capital than young companies or startups. Banks want to see proven records of accomplishment of success, including increasing revenues, pristine credit and a strong funding application.
Unfortunately, newer businesses generally have to rely on using lines of credit, credit cards and do not have the necessary capital funds to help provide valuable sources of funding. While most banks turn down new businesses, there are many hard money lenders that will work with new businesses to help provide successful loan funding.
These experts can work with companies to help understand their individual business marketplaces, industries, funding options and what types of funding are right for each type of business opportunity.