How to Obtain Loans to Improve Working Capital for a Business with Bad Credit?
Working capital is a barometer of the financial health of a company. By improving the working capital ratio, the company can easily meet all its financial obligations. Moreover, the better the working capital of a company, the better it is positioned to exploit business opportunities that come along its way.
Your business can benefit in several ways through an improved working capital position. You will be able to return the loans early, buy inventories in bulk to obtain discounts, and ensure timely payment of employee salaries. There are two ways you can improve working capital ratio of your business. One way is to implement effective capital management practices while other is to obtain loans. Below are some important sources from which you can obtain loans to improve the working capital ratio, even if you have bad credit score.
1. Small Business Administration Loans (SBA Loans)
SBA loans are the best option for small businesses. The SBA is a government entity that guarantees 75% to 85% payment of the loan amount to the lender in case of a default. Lenders that issue SBA loans can be banks, micro lending institutions, organizations, and others. Since SBA assumes much of the risks of the loan, most lenders set lenient requirements and longer payment periods. In most cases, you will be able to obtain the lowest rates on SBA loans.
By all accounts, obtaining a SBA loan is a great option to improve working capital since it is relatively easier to obtain as compared to traditional loans. However, there are still certain things you should know before applying for a SBA loan. Your credit score should be high (i.e. above 600). And also keep in mind that although collateral is not required to obtain the loan, you may qualify for a lower rate if you offer collateral for it. This will offer assurance to lenders about the loan amount that aren’t satisfied with the credit score.
2. Factoring for Businesses
Another great option to obtain working capital loan is to apply for invoice factoring. It is not a typical loan since no debt is assumed. Instead, it is a cash advance that you receive from the factoring company by selling them your customer invoices. It is a quick and flexible way to improve your working capital.
3. Accountable Capital’s Working Capital Loan
Accountable Capital offers businesses working capital loans to easily meet financial obligations. The best thing about the working capital loan is that you only pay for the amount you use instead of the whole amount. In addition, you can obtain this loan instantly if you fulfil its basic financial requirements. This will help you to keep the cash flow healthy during lean periods and pay back the amount when the sales volume goes up.
In the end, working capital is the backbone of any business and that’s why it’s important that you take steps to improve it. By following the above tips, you can easily gain the required finances to improve cash flow of your business, and thereby the working capital. If you want to know more about the working capital loan, you can visit the website here.