Working Capital Loans

As a short-term form of borrowing, there are a variety of flexible working capital loans for small businesses available. The most common types of loans are traditional short-term loans, business lines of credit, credit cards, overdrafts and invoice financing. These are ideal working capital loans for start-ups and established businesses.

By working with a variety of lenders including traditional high street banks, online lenders and alternative peer to peer lenders, we can offer amounts from £1,000 to £20,000,000. Although, for a working capital loan the short-term arrangements are usually associated with lower amounts.

The most common type of working capital loan is a traditional short-term loan, which is available from the majority of lenders. These types of loans will usually have a fixed repayment period of less than one year, although they can be repaid within just a few months.

As one of the most traditional forms of lending the criteria tend to be less flexible, so your business should have a good credit rating and be able to demonstrate a strong financial position.

A line of credit will provide your business with access to an agreed sum of credit, which you can draw upon as and when your business requires an increase in working capital. A line of credit is one of the most flexible types of working capital loan, as your business is only charged based on what you have borrowed.

In addition, it is also possible to tailor your repayments to the businesses available cash flow. This means that if your working capital increases you can clear the outstanding balance, but during quiet periods you can choose to pay just minimum monthly payments.

A business credit card is another type of finance which is designed to improve working capital and is an ideal working capital loan for new businesses. If your business is looking to build a good credit history, a business card could be the ideal option, as meeting the repayments could provide you with access to future credit.

Generally, a credit card is more accessible than traditional working capital loans, however this can mean that the interest rate is higher than other options.

A similar option is a business overdraft, which provides your business with flexible access to capital as you need it. This means that when your working capital runs out, your business still has access to funds through your own bank account.

In a similar way to a credit card and line of credit, the interest charged will be based on the amount you borrow. An overdraft is available as either an unsecured or secured form of lending, so there are terms available to suit almost every business.

Invoice finance is a type of asset-based lending, which could allow your business to release capital tied up in slow or late paying invoices. This is an ideal form of finance for those who do not want to commit to the standard repayments on a working capital loan. Instead the finance is released based on funds which the company is already owed.

If your working capital is struggling due to unpaid invoices, invoice finance will unlock the funds you are owed so that your business can operate successfully.

There are two types of invoice financing available, factoring and discounting. If an invoice factoring company purchases your invoice, they will provide you with an immediate payment in return for the invoice. Your business is still responsible for recovering the invoice amount, so your customers will be unaware of the lender’s involvement.

In comparison, invoice discounting will put the lender in charge of negotiating with your customers for the payment of the outstanding invoice. In both forms your business receives roughly 80% of the invoice amount, with the remainder provided as a fee.