Working Capital

Working capital financing provides a business with the added cash it needs to cover operational expenses.

Once funding comes through, it can be applied toward any business expense, making this type of financing a very flexible choice. There are several options to choose from when seeking a working capital loan. Financing can come in the form of a line of credit, factoring, term loans, and credit cards.

What Kind of Funding Do We Do?

A line of credit lets the borrower take funds out of an account repeatedly as needed. Payments back into the account free up cash for the future. Lines can be secured on collateral assets or unsecured, based on the borrower’s credit profile.

Term loans are a short-term financing solution that gives an extra boost to working capital. These loans mature in one to three years and can then be paid in full or transferred to a long-term financing option.

Factoring uses the value of a company’s accounts receivable, purchase orders, and contracts to generate working capital. A factor will purchase the outstanding invoice and forward cash to the business. Then, the factor seeks repayment from the business’s client.

Business credit cards operate just like personal credit cards. They help new business owners keep their personal and business accounts separate and make financial documentation easier. Cards are widely available from merchants worldwide.

Overview

For major purchases, like heavy equipment and real estate, financing is typically tied to that asset, meaning funds can be spent for one purpose only. Working capital loans can be spent to cover any legitimate business expenses. For companies with a seasonal sales cycle, working capital loans can help smooth out the annual bumps and dips.

A line of credit lets the borrower take funds out of an account repeatedly as needed. Payments back into the account free up cash for the future. Lines can be secured on collateral assets or unsecured, based on the borrower’s credit profile.

Factoring uses the value of a company’s accounts receivable, purchase orders, and contracts to generate working capital. A factor will purchase the outstanding invoice and forward cash to the business. Then, the factor seeks repayment from the business’s client.

Loan Highlights

Working capital loans can be used for any legitimate business expense.
Lines of credit can be borrowed from again and again.
Factoring is not considered a loan, since the factor purchases accounts from the business.
Term loans provide funding for short-term projects.

Pros

There are many different types of working capital financing available.
Funds aren’t tied to a specific asset and can be used for payroll, utilities, supplies, etc.
Borrowers aren’t locked into a long-term payment obligation.
Factoring rates and qualifications are based on the business’s clients, instead of its credit.

Cons

Interest rates on some products can be high.
Unsecured lines of credit are sometimes difficult to qualify for.
Long-term financing should be in place to cover term loans at maturity.
Default on loans and credit cards can affect a borrower’s personal credit record.

Address: 885 Gold Hill Rd, Suite 454, Fort Mill, SC 29708
Call: 855-735-BRAC (2722)
Email: solutions@mbraccapital.com
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