A working capital loan is ideal for companies who need to cover their day-to-day operational expenses in order to continue the business. In most cases, companies apply for this loan if they are unable to generate the right amount of revenue that is needed to meet daily expenses incurred by the business operations. Working capital loan differs from other business loans since it does not allow companies to acquire capital in order to expand. It only covers the expenses incurred by existing capital and human resources, which include utilities, rents, payroll, and a lot more. It is generally granted only to businesses with a high credit rating. The funds are also meant to be used until the company is able to generate enough profit to cover its own expenses.
Despite the inability to cover day to day operating expenses, a working capital loan makes it possible for companies to continue their operations. This way, they have enough to look for ways to generate the revenues that they need based on their existing human resources and capital.
Oftentimes, working capital loan is needed by businesses that are cyclical or seasonal to run their daily operations during off season. Your business may have enough funds to pay its annual obligations but you still need the capital to handle your short-term obligations. Inventory and payroll for the employees are just some of the examples of where you can use your working capital loan. During the business’ peak season, owners may also use the funds to produce more products or services to meet the demands of the clients.
There are small businesses that use this type of loan to handle any unexpected circumstances that may cause financial loses. Whether for increased expenses because of additional marketing efforts or for setting up a new branch office, this type of loan can be of great assistance.
For a better understanding on how working capital loans work, don’t hesitate to contact Capitalize. Head on to their website and discover why many small businesses in Singapore trust their company.