Small businesses can need finance for different reasons and one of the common moves they make is to apply for a working capital loan.
A working capital loan is a short-term loan option to help businesses cover the costs of their day-to-day operations.
The sorts of things a small business can use a working capital loan for include paying wages, invoices and covering advertising expenses.
Working capital loans are similar in nature to short-term business loans, whereby the small business enters an agreement to borrow a certain amount of money to be repaid over a short time period up to 12 months.
The amount borrowed in a working capital loan is usually somewhere between $5,000 and $1 million but it can be higher than that and it all depends on the small business’ type of business, their credit rating and the lender they are using.
These types of small business loans can be secured by assets the business holds but they are typically unsecured and lent out based on a business’ ability to generate sustainable revenue to make repayments.
With the majority of businesses fitting into the small-to-medium enterprise category in Australia, working capital loans are a very popular option for businesses applying for a loan.
So many businesses have issues accessing working capital and find turning to these business loans invaluable in keeping their operation ticking over.
Working capital loans come in two types, the first being a term loan where the idea is to take out a one-off loan to cover some general costs all at once or to cover one specific expense such as setting up a new office.
The other type of working capital loan is a revolving line of credit for businesses that want to have ongoing access to finance ready to cover expenses as they pop up without having to continually reapply for loans.
The most common form is a business line of credit and a business overdraft but invoice finance and business credit cards are also options for businesses who expect to need access to finance repeatedly over time.
If your small business needs access to working capital like most other Aussie businesses do, call Perry Finance today to speak about your options for a working capital loan and whether they could help you achieve your small business goals.