What is Working Capital?
Available money for day-to-day operations within a business is known as Working Capital.
What is a Working Capital Loan?
Working Capital Loans are used to finance a company's short term day-to-day requirements. They are designed to inject cash into the business to enable it to make quick changes, such as going after new opportunities, employing extra staff for expansion or buying stock. Working Capital Loans are not generally used to purchase assets for long-term investments. They can help businesses grow quickly and/or manage their cash flow.
Types of Working Capital Loan
There are different ways you can source Working Capital for your business. It's always best to speak to your accountant, but for a quick understanding we've summarised the most common here:
- Bank overdraft facility/credit line
- Dependant on company financial position and relationship with their bank
- Subject to annual review, variable interest rates, and renewal fees
- Not always available for start-up businesses
- Can be withdrawn instantly
- Short-term loan
- Fixed interest rate over the repayment period
- Can be secured or unsecured
- Great for seasonal businesses, paying VAT and tax bills
- Invoice discounting/factoring
- Secured on issued invoices
- Releases up to 90% of the value of an invoice immediately
- Can be used long-term
- Cannot be used to fund export invoices
- Read more about Invoice Discounting
- Funding via personal resources
- Obtained from personal resources and/or investment from friends and/or family
- Ideal for a start-up business
Is a Working Capital Loan right for my business?
A Working Capital Loan can be a valuable financial management tool for any business. It can enable you to continue operating smoothly without sacrificing cash flow or depleting your cash reserves. It is a resource for businesses wanting to take advantage of a time-sensitive sales opportunity that requires an increase in stock or staff. A Working Capital Loan can help your business grow.
Why Companies need Working Capital
Put simply, Working Capital is the cash available within a business to enable it to pay its day-to-day running costs. This is also known as liquidity. The more liquid a company the better it is regarded by credit check companies such as Experian.
Working Capital Loan Interest Rate
The Interest Rate on a Working Capital Loan will vary between lenders. Generally, rates can be between 5-16% depending on business circumstances and the type of loan required.
Apply for a Working Capital Loan
To apply for a Working Capital Loan with us, you'll need to provide the following:
- Company financials/full set of latest accounts including a detailed profit and loss account
- Latest management accounts
- 3 months business bank statements
- Names, dates of birth and five years home addresses for anyone owning more than 20% of the company's share capital
Why use Reality Finance for a Working Capital Loan?
When considering a loan for your business, we would always advise speaking to one of our team members at Reality Finance for a tailored solution. We understand that every business faces different challenges and circumstances. Our team will discuss the funding solutions available to meet your business needs.
- Dedicated Account Manager
- We can often source payment options that are not offered by high street banks
- Flexible funding choices
- No upfront costs
- Payment plans designed around your business and cash flow
- Quick turnarounds with most decisions made within 24hrs
- We work with all businesses, from start-ups to large companies
- 5* service rating on Feefo