Working Capital Line of Credit: Starting Your Search
Working Capital Line of Credit: Your 4 Best Options. A working capital line of credit is a commercial line of credit that a business owner utilises to pay for operational expenses including rent, inventory, and payroll.For business owners who are experiencing seasonal cycles or cash flow shortages, this business loan option is one of the most beneficial options.
We’ll examine all there is to know about working capital lines of credit in detail in this guide. We’ll also go over information on the following prime choices for a working capital line of credit:
What Is Working Capital?
The difference between a company’s current assets and current liabilities is its net working capital. Even more specifically, whatever a company possesses in cash or that could theoretically be turned into cash within a year is referred to as current assets. A company’s current liabilities, meanwhile, include all of its debts and commitments that are due within the next year.
Working capital is essentially the amount of liquid assets that remain after all short-term loans have been paid. Working capital is the money a company has available to pay for ongoing expenses, as well as a measure of its short-term financial health.
What Is a Line of Credit for Working Capital?
A working capital line of credit is a line of credit that a company obtains for working capital as opposed to investing in a single transaction.
Small business owners can borrow money up to a certain amount via a business line of credit. The borrowed money must be returned within a predetermined time period. Using lines of credit might help you bridge unforeseen gaps in your company’s financial flow.
Business working capital line of credit
With a line of credit, business owners only have to pay back what they really use, unlike more conventional funding solutions. You can access your line of credit anytime you need it, and you’ll pay the money back with interest over a certain period of time. Your credit line usually returns to its initial value once you have paid off your debt. Because of this, credit lines are sometimes known as revolving credit lines.
A working capital line of credit might be needed if you required it to assist with your daily cash flow, to help you pay personnel, or to pay for various maintenance costs, to mention a few instances.
If you anticipate needing a particular amount of financing, you should think about working capital loans. You have more freedom to withdraw and use money as needed with lines of credit.
Best Choices for Working Capital Lines of Credit
Some of the top working capital credit options for small business owners are as follows:
1. Headway Capital
Working capital lines of credit are made available by lender Headway Capital. They offer products with maturities of 12 to 24 months and a price range of $5,000 to $100,000. Daily interest on your Headway Capital credit line will range from 0.11% to 0.22%. Also, this working capital line of credit option gives you the choice of weekly or monthly payments.
Headway Capital will supply you with a line of credit in as little as two business days if you have one year of business experience and annual revenue of $50,000 or more. You can reduce interest charges on this line of credit by paying off your balance early.
Bluevine, a different lender, refers to their product as “Flex Credit” and provides a working capital line of credit. This product has a price range of $5,000 to $250,000 with a duration of six or twelve months. The basic interest rate for the Flex Credit product also starts at 6.2%.
You need a FICO score of 625 or higher, at least 24 months of business history, and $40,000 or more in monthly revenue to qualify for the Flex Credit product. If you meet the requirements, Bluevine will fund you in a few of business days.
Another lender that provides lines of credit for working capital is Fundbox. Fundbox is an excellent choice even for business owners who only require a small quantity of capital because these credit lines range from $1,000 to $100,000. The borrower has a choice of a 12 or 24 week repayment period.
The quick application process is Fundbox’s main selling point. The Fundbox application may be easily connected to your business bank account or accounting programme, and they will be able to provide you with a credit decision in only a few minutes. A 500 credit score, three months in operation, and $25,000 in yearly income are requirements for eligibility. The introductory interest rate is 4.66%.
4. OnDeck Capital
OnDeck Capital is the last lender on our list of working capital line of credit providers. This lender offers 12-month term lines of credit with amounts ranging from $6,000 to $100,000. The OnDeck credit lines have APRs that vary from 29.9% to 65.9%. (based on loans originated in the half-year ending March 31, 2022).
You must have a FICO score of 625 or higher, a minimum of 12 months of company experience, and an annual income of at least $100,000 to be eligible for this credit option. OnDeck may be able to provide you with a line of credit on the same day if you move quickly to provide them with the data they require for the underwriting procedure.
How to Use a Working Capital Line of Credit
A working capital line of credit can be used for many reasons, including the following:
- Making pre-season purchases for seasonal businesses
- Fulfilling large, unexpected orders without having to request advances from suppliers
- Covering rent, payroll, and utilities when you’re facing a cash flow shortage
- Addressing emergency repair costs
- Providing peace of mind that you have a back-up working capital source