When is the Best Time to Get a Working Capital Loan?

What is working capital? Business people describe working capital as the funds that companies need to meet their typical, short-term obligations. For example, businesses need working capital in order to pay employees and handle other regular bills. Obviously, successful companies need to prioritize working capital management to stay in business. In order to thrive and grow, some kinds of businesses have to maintain a very delicate balance between funding growth and enjoying both liquidity and profits.

When Should a Business Consider a Working Capital Loan?

You might find that applying for a working capital loan helps your company maintain a better balance between taking advantage of growth opportunities and keeping enough liquid assets around to pay the bills. These days, you can even obtain loans from online lenders that feature simple applications, quick approvals, and rapid funding. Most businesses can’t afford to wait weeks or months to get a loan funded, so these online lending benefits have proven very popular.

When is the best time to obtain a working capital loan?

Most business experts agree that an opportunity to increase profits always supports the business’ case for borrowing money. The issue for many companies is that they suffer from a lag between the time they need to invest in growth and the time they can enjoy those additional profits. For example, you could need time to actually bring a new product idea to market and need money today to buy supplies or upgrade equipment. More commonly with B2B companies, your business might have to to wait 60 to 90 days for your purchasers to pay their bills. Either way, a working capital loan can make sure your normal bills get paid while you wait for your profits to roll in.

Keep your business running during the off season with a working capital loan.

Some businesses are naturally busier during some seasons than others. During the off-season, these companies may use their equipment and employees to make improvements or produce products that they will need when they get busy again. A working capital loan can provide your company with the right solution if you need to tend Christmas trees in July or hope to maintain your pool supply business in January.

Weather unexpected business problems by borrowing money to help manage working capital

Most companies buy insurance policies to help them manage a variety of risks. However, most entrepreneurs find that they can’t afford to insure everything or even predict every potential hazard. If you need to close and repair your thriving business because of a lightning strike or some other unusual problem, a working capital loan can keep your company afloat until you recover.

Can You Qualify for a Working Capital Loan?

Traditional lenders may only consider applicants with businesses that have already established good credit scores. If you’ve always self-funded your company. You may never have borrowed enough to establish the kind of credit that these lenders expect.

A new crop of online lenders uses new financial technology to gather all sorts of alternative data about their applicants. For example, they may base a loan decision upon your accounts receivables and previous sales.

Because these online lenders can be more flexible about the way they judge creditworthiness.  They may say yes, even if traditional finance companies have declined your application. It could be whenever you need to invest in growth, tide your business over until profits roll in. The best time to apply for a working capital loan really depends upon your unique business.

Read also: Top Financial Management Tips from Experts