Working Capital

Need Working Capital

Is your business in need of additional working capital? The SBA program is a great resource to find working capital for your business needs!

When you request a working capital loan through the SBA loan program the lender will typically go over the following with you or ask you questions about the following.

The first thing most lenders ask is what do you intend to use the working capital loan funds for. This will help the bank understand the need for additional funds and/or if in fact the funds they need would be used for other categorized loan sources such as buying equipment or paying off debt etc.

Examples of true working capital needs would be for Marketing, Payroll, Operating Expenses that the business has, funds to assist in unforeseen costs during a business ownership transition, funds to assist a start up business prior to the business bringing in revenue, building software and websites. Maybe your business relies on receivables to come in on time from your vendor clients in order for your to pay your employees and manage your cash burn cycle. If this is the case an SBA working Capital Line of Credit (LOC) may also be the key to your businesses future success.

The amount of working capital that you ask for must be justified. The bank cannot lend a potential borrower a large amount of working capital just because they can afford it. The working capital needs to benefit the business and be used for justified business purposes. If the you seem to be asking for an unreasonable amount of working capital the underwriter may condition for projections and assumptions to justify why the business need the funds; however this doesn’t happen that often.

Working capital loans are usually allowed a 10 year term. Working Capital lines of credit can be revolving for up to 7 years and then termed out after that. This beats most working capital loans out there on the market today. Most lenders that do not utilize the SBA program usually have shorter loan terms in regard to years and higher interest rates! This kills your working Capital. The last thing you want is a loan that strangles your businesses cashflow instead of allowing your business to grow with the option of low monthly payments.

If your business is growing or you plan on growing your business in the near future you should talk to a Guru today to see how you can set yourself up for success through SBA financing instead of trying to find financing when you need it most.