Working capital finance is a type of business loan that can help you take care of your immediate and day-to-day running expenses.
Like the name suggests, having this type of financing means you have the funds to cover crucial operating expenses. This includes paying creditors, covering the cost of staff salaries and wages, or adding more inventory to take advantage of the busier peak periods.
Importantly, it also means you can have the cash available you need it to create growth and take advantage of business opportunities when they occur.
One type of Working Capital Finance is an overdraft facility. An overdraft is an approved amount of credit you can use if and when you need it, and it is usually attached to your business transaction account allowing your overdraw your account up to your approved limit. Because it’s designed to be a day-to-day facility, and not for capital purchases or long-term financing, an overdraft may provide a permanent source of short term funding to meet your operational expenses. Long term capital purchases may be funded more appropriately using an Equipment & Asset Loan – Click here to find out more…
Line of Credit
For access to larger amounts of finance, a Line of Credit is another option. Like the overdraft facility, it is a credit facility that you can use when needed. However, a Line of Credit is usually secured by bricks and mortar property and generally not attached to a transaction account. So as you request draw-downs from it, you would transfer it to your transaction or cheque account. Like an overdraft, interest is calculated daily on the outstanding balance.
Trade and Inventory Finance
For many businesses, keeping adequate stock levels on the floor is what keeps them running efficiently. Inventory Finance is a short-term loan that allows you to purchase stock in advance without using up all your cash reserves. The products you buy are the security, so you don’t have to use your assets or property to secure the loan. This type of finance is particularly attractive for overseas trade purchases when buyers and sellers don’t necessarily know one other.
For many small and medium business, having money tied up in debtor invoices can stifle growth and even cripple cashflow. By using a facility like this, a lender treats the invoices as security and no other security is generally required. It can free you up to receive the money from your debtor’s ledger today rather than waiting the traditional 30, 60 or even 90 days. Read more about Accounts Receivable Finance…