Is a Capital Loan Right for You?

The Holidays are over, the new years’ resolutions are starting to ebb, and your business may be slowing down a bit, but your expenses are staying the same. How can you keep up with your expenses when you don’t have as much revenue coming in? One thing you may consider turning to is a working capital loan.

What is a working capital loan?

Have you ever thought to yourself “If I can just make it through this week/month/year then I’ll be able to keep going even longer.”? A capital loan is used to keep the cash flow going during slow times in your business so you can make it through the challenging week/month/year that you are dealing with before your business takes off again. You can use it to pay staff, grow your inventory, and take care of other operating costs. There is no limit to what you can use the money from a capital loan for as long as it is used to keep your business going. It can be extremely useful to have this extra income while you get your business back to where it needs to be. But it is still a risk and so it’s important you understand the pros and cons before you decide to get this type of loan.

Pros

• You can get one quickly. Traditional loans take a lot of paperwork and there’s no guarantee that you will be approved after filling out the paperwork and waiting to hear back from the loan company. With a working capital loan, you can get approval in 24 to 48 hours.
• You may not need to put up any collateral to get one. Many loans require something to secure the loan in case you are not able to pay. This means you could lose your home or business if you are unable to pay the loan. If you have good credit, a working capital loan will not require any collateral so you will not lose your home or business if you are unable to pay the loan in the end.
• The loan provides flexibility in your spending. There are not as many restrictions when it comes to what you can spend the money on as long as it helps you keep your business going.
• You can pay the loan off early. These loans are meant to be short-term loans so there is no penalty if you can pay them off early. In fact, it is better for you and your credit if you do pay them early.

Cons

• Because it is a short-term loan, the interest rates may be high. They are meant to be paid off quickly so the interest rate will reflect that. Unfortunately, if you are unable to pay it off quickly that may hurt you in the long run.
• Collateral may be required if you have poor credit. If you have not been able to pay off loans before and your credit is poor, you may be required to secure the loan in some way. This may not be the best option for you if you have poor credit.
• They do not have a partial repayment option. You will be required to pay the entire loan plus interest in the end even if you file for bankruptcy.

With any type of loan, there is always a risk but if you know what loan is best then the risk may be worth it. If you are thinking you need financial help for a short time and you are certain you will be able to pay the money back quickly, this is likely the right choice for you. If you have more questions on what type of loan you may need, call us and our experts can help you decide.