How to Figure Out If You Need a Working Capital Loan
A Working capital loan is a term that essentially refers to current assets minus current liabilities. It’s a measure of your operational efficiency and financial health in the short term.
Your working capital ratio indicates whether you have enough short-term assets to cover any debts that will be due in the near future – and you can figure that out with the help of your accountant.
There are several ways that you can determine if you need access to a working capital loan, including some of the situations below:
Is your business seasonal?
You may have enough cash flow to cover expenses when business is going well, but do you find that your business is seasonal at all? Are there periods of time when your cash flow diminishes?
As you probably already know, your debts still require timely payments, even during those periods.
If that is the case, a working capital loan can cover seasonal gaps to ensure that you have enough liquid assets to pay debts and keep operations going.
Are you starting a new business?
Many new or recently launched businesses suffer from working capital issues. Many owners must invest large sums of money into equipment, overhead costs, launching costs, etc. and often have very little left over for working capital needs.
As a result, newer business owners may consider applying for a short-term working capital loan from Alliance Funding Group to take care of the inevitable expenses that will arise and keep their business growing.
Have you determined your specific working capital needs?
As many financial experts mention, most business owners greatly underestimate their working capital needs. Although it’s hard sometimes to estimate them, it’s a good idea to have a rough estimate at the very minimum.
Working capital needs greatly vary depending on the industry and specific business. Some types of service businesses have relatively low working capital needs. Other businesses that require equipment leasing or purchases or retail businesses have larger working capital needs.
A lack of sufficient working capital can result in the stagnation of the growth of your business, late fees or the potential for defaulting on debts, and a host of other undesirable situations.
Alliance Funding Group can meet with you to determine your working capital needs and connect you with a suitable loan to cover your short-term expenses.