Most companies often get on the verge of losing money, either due to losing market or sales, from a furious competitor. In that case, the company needs to be running for the time being, until it gets up again. Daily financial expenses are to be met instead, aside from salaries and capital investments. In such cases, working capital loans come to great help. Most banks offer these loans to all types of companies starting from big to the small. At the time of emergency, entrepreneurs seem to be having this choice only.
There are a lot of types of Working capital loans that are used by companies. Out of those, only the below mentioned six can be easily accompanied and applied immediately.
Short Term Loans:
Probably a secure option for a company, short term loans provide finance to the company easily. But with a fixed interest and a small repayment period, which ranges to 12 months at a stretch. It is usually secured, than others. Short term loans also provide several advantages to money takers, even a better deal with less interest, on short debts.
Bank Overdraft facility/Credit Line:
If a company has a good relationship with the lender, it can get better deals. Although the amount to be lent depends on the company’s credit score, Interest rate, maximum limit of the credit range and how good are the relationships with the lender. While the company taking the money pays only the over amount applicable interest, with a slight increase to several percents on a pass of the deadline.
Equity Funding type via own resources or through investors:
The most common form of loan equity requires the company handler’s resources to be taken into account, in place of the money that is to be paid. For startups and small companies that are just growing up, with severe financial problems, it seems like a proper choice. Also, the rate of interest is dependent on the amount that is lent to the company. One advantage of Equity funding is that most companies provide this type of loan, even with a bad credit history.
Trade Creditor:
A kind of deal and agreement wise credit providence, this is a type of working loan from a creditor that will give finance. But only if the company bulks out orders from them only. While it works for most of the companies, the lender will though keep in mind your ideal credit payment strategies and history.
Accounts receivable Loans:
Reputable companies can apply for this type of working loan, as Accounts receivable loans if a confirmation to the sales can be given on pre. These loans are supplied only under consideration and trust to an easy recovery without negligence. One advantage of this type is that companies can ask for bigger financial help too.
Factoring or Advances type:
For companies that are more familiar with card payments and use them regularly, this is a good choice. While being similar to the accounts receivable working capital loan type, this one makes sure you get better sales and credit in the future.
Although working capital loans are usually offered not only by banks, other private companies have a strict recovery strategy that needs to be fulfilled in all cases. You can also take help from an expert in this field like Brian Paes-Braga and others. Brian Paes Braga is a Canadian entrepreneur, capital markets executive, and philanthropist.
