Is Working Capital Ideal for a Long-Term Business Loan?
What is Working Capital?
Working capital is defined by: “Current Assets/Current Liabilities”.
How do Working Capital Loans Work?
Most working capital loans are unsecured meaning, they may not require collateral. Unsecured working capital loans unfortunately come with a higher than normal interest rate due to their high-risk nature. Interest rates can slide between 36% to 99% and sometimes higher.
Each financial institution will have their own requirements for obtaining a working capital loan such as:
- Above 550 credit score and in some require above 600
- At least one year in business if not longer
- Bad or lower credit may require collateral on essential equipment
- A required amount of annual income (the amount can change depending on the loan size)
- Working Capital Loan Payoff within 6 months to a year
(Can you imagine paying 36% interest or higher on a $250,000 loan?)
Repayment of Working Capital Loans
Working capital loan payments are typically pulled daily, weekly or monthly from the company’s bank via ACH payment.
Working capital loan payments can be very high. Some companies require separate funding to assist with repayment. Each new loan creates a mark on a company’s credit, which increases the risk of working capital loans. This could potentially increase the interest rate on future loans.
Are Working Capital Loans Worth the Risk?
Working capital is most often intended to cover day-to-day operation costs and it isn’t ideal for business to burden their cash flow with high interest loan repayments. Loan liabilities can jeopardize a company’s ability to pay their employees, vendors, rent and/or other lenders.
“Lease” financing is often a much better option! Commercial Capital offers multiple lease/finance opportunities that are customizable to a company’s specific needs and requirements. Commercial Capital works with you to keep your company’s CASH FLOW KING!
Let Commercial Capital Company show you how lease financing can help put your company on the fast track to building bigger revenue and successful growth!
Request a meeting with Commercial Capital Company, LLC