Growth can be a balancing act for small business owners. They rely on limited resources to solve big problems, stay ahead of competitors, and keep customers happy. No matter how well they plan, they can never adequately prepare for the future. It’s no wonder that so many small businesses use alternative lending sources to accelerate their growth. Their flexible structure makes Working Capital loans appealing to small business owners.
Here are some advantages of a Working Capital loan
Flexible payments, with no NSF or late fees: Many business owners confuse Working Capital with traditional loans, overlooking several essential differences. Most loans products have regular repayment schedules that remain in place throughout the loan cycle, and borrowers repay the same fixed amount until they achieve a zero balance. Working Capital loans are more flexibility to borrowers, who pay a percentage of daily credit card receivables until they have repaid the loan in full. Some business owners appreciate this system because their payments are tied to their daily sales. While they may pay more on a high-volume day, they pay less or nothing on a day when they are not making sales, which eliminates worries over insufficient funds and overdrafts.
Short-term financing: Working Capital loans may charge higher percentages, but unlike other products such as credit card advances and funding, they are designed to be rapidly repaid. By paying a percentage of credit card revenue, merchants pay down their Working Capital loan without the risk of getting more deeply into debt. Credit cards that offer financing and cash advance also have the option to make minimum payments, which not only extends the life of the loan, it may even push the merchant into a higher interest rate when the trial period expires. Additionally, merchants who use the credit card for purchases while carrying a balance may incur penalty fees.
Available to merchants with sub-par credit scores: Cash flow uncertainties associated with running a small business are typical among small business owners, another reason why they may not qualify for traditional loan products. Their ability to be eligible for a Working Capital loan depends more on their business performance and history than their personal credit score. Alternative lenders look at other criteria when evaluating prospective borrowers, including such disparate items as social media ratings and reviews, college transcripts, and credit card receipts.
Provides additional financing options: Merchants who review Working Capital options derive a better basis for comparing against other forms of financing. Even if you choose another type of funding, this knowledge may help you at some point in the future. For example, traditional business loans usually have lower interest rates than Working Capital, but small business owners who are approved for a small business loan today may not meet the same strenuous requirements tomorrow. In those cases, a Working Capital loan may offer a viable alternative form of financing.
There are more ways than ever to get funded today, and many non-traditional loans are far less complicated and time-consuming than conservative loan offerings. Over the years, Working Capital loans have helped millions of small business owners obtain the capital they need to build infrastructure, innovate, and grow their businesses.