The one thing every business in today’s world should expect is the unexpected. This is especially the case with working capital and cash flow. It can be next to impossible to forecast changes in the coming weeks, months, or years that could have an unexpected financial impact on a business. This is why it’s important to prepare for such possibilities ahead of time by learning more about working capital loans.

Who Needs a Working Capital Loan?
All businesses that utilize accounts receivable or rely on a positive cash flow to maintain smooth operation can benefit from a working capital loan. Owners of small businesses and start-ups tend to have the most difficulty with regulating cash flow. For them, such a loan could be a lifesaver. While it’s not necessarily recommended that companies with a healthy supply of capital should take out one of these loans, it is crucial that it be considered as an option should cash flow become an issue in the future.
Working Capital Loans vs. Traditional Bank Loans
Any business veteran will tell you that obtaining financing from a bank can be an exercise in futility for many. As a result of the 2008 global recession, banks have been cutting back on lending across the board and have made it next to impossible for some businesses to even be approved for the simplest credit products. Moreover, larger-scale bank loans often require collateral that could be put in danger of foreclosure or repossession if loan payments are not made on time.
Unlike traditional bank loans, working capital loans do not have stringent credit requirements nor do they require collateral in order to be approved. Instead, loan providers take into account the entire financial picture of the business and lend according to its ability to pay. This makes the proposition of taking out a loan to bolster cash flow much easier and less risky than a secured bank loan in the long run.
How to Prepare for a Working Capital Loan
If you’re convinced that a working capital loan is right for you and your business, there are a few things to organize and get ready before applying. Because these loans are approved based on revenues and the overall financial profile of a business, it’s critical that all the relevant documentation is gathered beforehand. This may require a bit of legwork, but it’s worth it to have all your records together and organized before taking the plunge. It’s also a great excuse for reacquainting yourself with important financial information pertaining to your business.
While working capital loans aren’t for every business, every business may have a need for one down the line. If your business is running into issues with cash flow more often than it should be, a working capital loan may be just what you need to get your day-to-day operations back on track.