How to Determine If a Working Capital Loan Is Right for Your Business

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When you run a business, you’re bound to have unexpected expenses come up. If you don’t have money set aside in savings, a bump in the road could turn into a major hurdle. How would you handle needing to replace equipment or covering payroll when your clients haven’t paid their invoices?

These are just a few examples of when a working capital loan comes in handy. Rather than taking out a one-time, large loan, a working capital loan provides – you guessed it – working capital to help you cover day-to-day expenses.

But is this type of financing right for you? Ask yourself these questions to find out.

Why Do I Need Money?

If your answer is “because my business isn’t making any,” a working capital loan might not be a good fit. A loan is not necessarily the best way to save your business if it’s failing.

On the other hand, if you just need to cover a temporary cash crunch, a working capital loan can be ideal. Here are some situations that are great for this type of loan:

  • Covering payroll until you get paid by customers
  • Buying inventory in bulk to prepare for a busy season
  • Taking care of unexpected expenses
  • Expanding or moving into new space
  • Upgrading your equipment

Kabbage offers working capital loans available through revolving lines of credit.

How Quickly Will I Be Able to Pay it Back?

You need to be able to pay back a working capital loan within six to 12 months. If you need to borrow $100,000, can your business afford the monthly payments? Smaller amounts are typically easier to pay back, so make sure monthly loan payments are built into your budget.

The sooner you can pay your loan back, the less you’ll pay in fees, which are between 1.5 and 12 percent with Kabbage.

Do I Qualify for a Working Capital Loan?

The great news is that even if your credit score isn’t perfect, Kabbage looks at your business data in real time to determine your eligibility for a working capital loan. You apply online in just a few minutes, and Kabbage tells you instantly how much working capital you can access.

How Quickly Can I Get Funds?

Naturally, you want your loan disbursement now, not in three weeks. Traditional lenders can take that long to determine if you’re eligible, and then it can be ...

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