Just like every car needs fuel to keep it running, every business needs cash to cover basic operating needs such as payroll, rent, distributing, etc.

Working Capital is precisely that, money that you put into fueling your business.

When operating a business, planning is your best friend, specially when expanding. Lending institutions will often ask “What do you need the money for?” they want to know if this will be a long term or short term loan and the type of investment you are looking to make so they can fine tune a financial product to fit your business needs.

Some businesses use working capital loans to make more money out investments but how do you figure out how much you need? or better yet, how much can you get and what are the benefits?

The answer is very simple:

It all depends on your cashflow A.K.A. the amount of money that comes in and out of your business.

This is the reason why knowing your own cashflow and depositing all your sales in a business account is crucial to ensure a better control of your finances! It actually shows you how healthy your business is and how much money you have available for investment.

The key to this type of loan is knowing you can flip the investment and make more money out of it, this means making sure you can afford it. Trying to cover debt with even more debt is what makes 75% of new businesses fail within their first 2 years.

Fortunately if you need capital and it makes sense for your growing business, you can get it pretty fast.

The amount you can get is not primarily based on credit, it’s based on cashflow and since a healthy commercial type credit makes it easier to apply for future banking products, the benefits are both immediate and long term.

Other ways you can benefit from a financial product:

• Eliminates collateral: The biggest advantage of working capital loans is that they are unsecured. For most loans, collateral is essential as it acts as an assurance of repayment. However, this isn’t ideal as it puts your business personal assets at risk. Working capital loans save you from this hassle.
• Makes it easier to get financing: You can easily apply for a loan online submitting very few documents. As a result, the process is easier for you and funds are available faster.
• Maintains cash flow: Working capital financing helps you maintain good business cash flow. This means that your business gains stability and financial strength for unexpected needs.
• Makes it easy to get a line of credit: This type of loan facilitates the process of getting a line of credit where you can withdraw the amount that better fits your needs.
• Keeps you in complete control of your business: If you have venture capital backing your business, you have to share your ownership privileges with someone else. You cannot take all decisions and there is a constant risk of losing investors if anything goes wrong. But with working capital loans, you remain the sole owner of your business. The decisions you make and the strategies you draw up are entirely in your control.