Working capital is the money that your business has on hand, which can be used for day-to-day expenses incurred by the business. When you don’t have enough working capital on hand, your business could be in serious jeopardy, because bills might go unpaid, payroll might not be met, or inventory might not be purchased.
Here’s why you should seek a working capital loan when your cash reserves are low.
Benefits of working capital loans
Working capital loans are not used just to cover periods of low cash reserves, but can instead be used as an extremely important financial tool to keep your business running smoothly. Temporary shortfalls can indeed be managed by a working capital loan, but business growth can also be achieved by making critical investments at the right time, which help your company along the road to success.
You can use a working capital loan to keep your business running when there is a temporary downturn in the economy, and by consistently paying your bills, you’ll avoid damaging your credit score. If your business is a seasonal one, this could be especially important, because you already know there will be a slump in sales after your seasonal upturn occurs.
You may also encounter an unexpected opportunity in business, where having the cash on hand means you’re able to take advantage of a specific situation. This might be in securing a large quantity of inventory at a reduced price, it might be paying off a nagging debt, or it might even be acquiring another company to increase your market share.
Working capital loans can literally be used for any business purpose whatsoever, and even though your lender may not ask the reason for your loan, you should always have a good reason in mind for taking out a working capital loan. However you do end up using your working capital loan funds, it should be something that increases your revenue more than the total cost of the working capital loan itself.
Does your company need a working capital loan?
If your company is in need of a working capital loan, we may be able to provide the financial assistance you need. Contact us at Avery James, so we can explore some alternatives for funding your company, and getting you the working capital you need to succeed.