Experiencing a Cash Crunch? Try This Type of Financing

Experiencing a Cash Crunch? Try This Type of Financing

Many small businesses have sought additional funding during these difficult pandemic times. However, even when economic situations are more stable, a financial boost can assist in company growth. A working capital loan helps businesses with short-term needs. Such as paying employees, covering utilities and rent, increasing marketing, and buying supplies and equipment, and if your loan is unsecured, you do not even have to back it with collateral. Here are some of the most popular options that small businesses consider when they take out loans for working capital.

Obtain a Line of Credit

One of the advantages of a line of credit is its versatility. You have a pre-approved amount of funding available for whatever needs your business has. If it is a revolving credit line, you can borrow any amount you need up to the limit, and after it has been paid back, the same amount is once again available to you.

Take Out a Term Loan

When you take out a term loan, you obtain a lump sum that you repay with interest in fixed monthly amounts. For you to be approved for a term loan, lenders generally require that your company has steady cash flow. Also, you have been in business for at least a few years. This type of working capital loan could be secured or unsecured depending upon your business’s credit rating.

Receive a Merchant Cash Advance

A merchant cash advance is a working capital loan based on future company sales. The lender provides you with a lump-sum payment and then automatically receives a percentage of your sales daily until the debt is paid off. Since the payments are linked to your sales, you pay back less when sales are low and more when sales increase. This is a good option for new businesses that have not yet built a credit history. Since lenders do not base approval on your credit score but your volume of sales.

For more advice on working capital loans for small businesses, contact Gipson Commercial Solutions.