Working capital is the cash you have on hand to meet your current expenses. It’s the difference between what you own (assets) and what you owe (liabilities). You use it for payroll, paying suppliers, starting a new project, or whatever is necessary to keep your business in operation.
Working Capital Financing Based On Invoices, Purchase Orders, Or Assets
Your company may be providing services or products to companies that take an extended time to pay you. That leaves you without cash to pay your expenses. Invoice factoring places the needed funds quickly in your bank account.
Factoring means that you sell the invoices to a factoring company (factor). The factor pays you a percentage of the amount due. The factor then collects the total invoice from the customer.
Purchase Order Financing
Sometimes customers place large orders that you lack the resources to fill. A purchase order financing company provides advance payment to your suppliers. You pay the financing company when your customer pays you.
Your funds may be invested in assets such as accounts receivable or inventory, and currently unavailable for meeting expenses. Asset-based lending uses those assets as collateral. The loan usually functions as a revolving line of credit.
Working Capital Loans From The SBA Or Banks
The Small Business Administration (SBA) offers a “Microloan” program designed for small businesses. The loans can be used for working capital or for starting a new business. Qualifying for a Microloan is generally easy, and the loans frequently come with SBA training.
You may qualify for conventional bank financing. Your company must have a track record of growth, excellent financial statements, competent management, and substantial assets. Bank loans and lines of credit can be the most cost-effective choice.
Signal Peak Commercial Capital offers a wide range of financing options to help you meet your working capital needs. Contact us today for a free, no-obligation consultation and analysis of your business.