Is a Working Capital Loan Right for Your Business?
You may want to exhaust all other avenues to increase working capital before deciding to take out financing. Here are a few strategies to consider.
1. Increase Prices
The fastest way to make more money is to raise prices. Be sensitive, however, to your existing customers’ comfort levels. Raising prices too much may turn them off and force them to buy from a competitor.
2. Add Other Streams of Revenue
Constantly seek ways to innovate and you might be able to come up with new revenue streams to enhance profitability.
If clients regularly delay paying invoices, consider implementing a late fee on any invoice paid after a set date. This will either get clients to pay on time.. paydayloansohio.net/cities/youngston/.or add a little extra cash to your account.
4. Cut Down on Expenses
A careful analysis of your budget may show areas you can cut back on to free up working capital. Look especially at recurring subscriptions for software or services you no longer use.
In this webinar, we’ll review different types of working capital loans, important factors to consider before you apply, and help you evaluate whether this would be a good fit for your business.
In the end, only you can determine whether a working capital loan or other financing solution is the right move for your company if none of the above ideas helped. But there are several important questions you should ask yourself as you’re weighing the pros and cons.
1. Are You Likely to Qualify?
With many types of financing, both your business and personal credit may play a role in your ability to qualify. Checking your credit and researching a lender’s requirements may help you to figure out which types of financing you’re likely to qualify for before you apply. MatchFactor by Nav can also show you your approval odds for dozens of business financing options.
Your business’ ability to keep up with the repayment terms of a loan (daily, weekly, or monthly) is another critical piece of information you need to consider when you’re deciding whether or not to take out a working capital loan.
If your business takes out a loan that it ultimately can’t afford, you could potentially damage your business and personal credit severely. You and your business could also face negative repercussions for many years such as potential liens, bank levies, and even the loss of personal assets if you’ve put up a personal guarantee for the loan.
One often overlooked source of short-term business financing is vendor credit. If you have a good relationship with your vendors, they might be willing to offer you net-30, net-60, or even net-90 day terms on the goods and services your company needs.
These extended payment terms could help immensely with short-term cash flow problems and might even eliminate your need for a short-term loan elsewhere. All you have to do is ask to see if your vendors are willing to extend terms-and maybe see if your vendor’s competitor is willing to offer terms if your vendor denies the request.
Nav’s Verdict: Working Capital Loans
There’s no question that cash flow problems can be crippling to a business’ success. If your business is struggling month to month to find enough working capital to pay expenses, it might be time to try to figure out how to make some big changes in either your company’s expenses, income, or both. However, if you simply need a one-time, immediate influx of cash to make it through a rough patch, working capital financing could be just what the doctor ordered.