Sometimes, business growth needs a little momentum to get started. One booster that helps many small to midsize companies is a working capital loan.
Let’s say a startup suddenly gets a huge order for hundreds of widgets. It’s an exciting deal, but there’s a big stumbling block: The company doesn’t have the money to pay for the materials or labor necessary to fulfill the monumental contract. At that point, fast-working capital loans can supply the cash needed to facilitate rapid growth.
The Difference Between Traditional Small Business Loans and Working Capital Loans
What is a working capital loan, exactly? It’s a type of small business loan. However, it’s different from a classic business loan such as a line of credit. Working capital loans pay for unexpected operational costs such as bringing on seasonal workers, remodeling an office space to improve social distancing, or marketing to an emerging stream of eager customers. Classic business loans require more collateral and tend to take longer for approval. Plus, getting a small business loan can be tough to snag for companies without credit or experience.
Of course, plenty of business owners who can’t qualify for a small business loan take out personal loans in the form of credit cards and home equity lines. Though this may seem reasonable, it can backfire in several ways.
First, it puts personal assets and credit scores at risk. Secondly, it doesn’t do anything to build up corporate credit. And the amount of money that an individual can qualify to receive rarely covers the money needed to bridge financial gaps.
A better solution is to apply for a working capital loan and enjoy the benefits. At PEAC Solutions, our working capital loans for small businesses offer several advantages to owners, entrepreneurs, and founders looking for quick cash:
1. Our working capital loans don’t involve “double-dipping.”
Financial institutions frequently practice what’s known in the industry as “double-dipping.” In essence, they charge interest on interest if a loan is renewed.
True to its desire to partner with our clients who are approved for working capital loans, PEAC Solutions waives the remaining interest owed on the first loan when it’s rolled into a new one. This can save businesses tens of thousands of dollars in “double-dipped” interest fees, depending upon the length and amount of the original loan.
2. Our working capital loan application takes minutes, not days.
We’re proud to have developed a quick and easy application. It takes about five minutes or less to complete and requires no additional paperwork.
Most business loans for small businesses require a raft of information. This can include anything from tax returns and voided checks to personal bank statements and profit and loss spreadsheets. Not having to show these documents upfront lessens the time it takes to apply for a working capital loan.
3. Our funding process can take as few as 24 hours.
A big difference in working capital versus business loan expectations is having to wait for days or weeks to hear a response. With PEAC Solutions, applicants know whether they’ve been approved for their short-term loan within two days — and often sooner.
Additionally, companies won’t have to pay extra to get speedy answers. Sometimes, asking for money on a tight turnaround means added fees. Our philosophy is to make the experience more streamlined without increasing costs.
4. Our repayment terms can be as short as half a year.
The working capital loans we provide fit into the six- to 18-month range, pending credit approval. This makes them flexible and doable for companies that know they’ll have money coming in later but need on-hand capital today.
Most business loans for small business entities have a much longer payoff, which may not fit with a company’s vision. Being able to select an abbreviated timeline and personalized terms makes business leaders feel more confident and comfortable moving forward.
If you’re interested in learning more about working capital loan requirements, contact a PEAC Solutions Funding Advisor or a PEAC Solutions Representative. We’ll be happy to help you figure out whether a traditional business loan or working capital loan is best suited for your current goals.