5 Steps to Follow While Choosing The Right Working Capital Partner 1

5 Steps to Follow While Choosing The Right Working Capital Partner

Working capital is the ratio of your business’ current assets and current liabilities. A business needs working capital to pay the daily running cost, bills, pay workers/employees, keep its cash flow strong, fund larger projects, and ultimately stay afloat during even the most tough times. But sometimes, you may struggle to grow your business, or need additional working capital for bigger projects. This is where working capital financing can help.

With the right working capital partner, your business can survive tough economic times and grab advantage of big opportunities when they arise. However, there are various working capital financing options available for businesses that can lead to confusion in choosing the right one. Moreover, you have to take into account your company’s needs, the type of services offered by different providers, fees associated, and a lot of other factors.

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So, here are the five important steps for choosing the right working capital partner for your business:

1. Check out the various loan options

Out of many, the most common types of working capital loans include short-term loans, trade creditor, accounts receivable loans, bank overdraft, factoring loans, invoice discounting, line of credit, etc. Thus, it is important to compare these different options before selecting the right working capital loan to grow your business.

2. Compare eligibility criteria

The eligibility criteria differ from lender to lender and you must meet them in order to get your loan approved. The common eligibility criteria for a working capital loan usually include factors such as the applicant’s age, turnover of the business, credit score of the applicant, age of the business, credible financial history of profits. Make sure you check the eligibility criteria of your chosen working capital partner to avoid any delays in the financing process.

3. Assess the overall borrowing cost and compare with different lenders

When availing a working capital loan, it’s important to assess the overall cost of borrowing. This includes the interest rate, total loan amount, and tenure (or repayment period). This way, you get an overall picture of different offers and increase your chances of getting the best deal possible.

4. Look out for hidden charges

Remember that the advertised funding cost often is not the actual cost. Some lenders may charge processing fees, closing fees, and other fees that are not immediately apparent. So, read the fine print carefully and make sure that you understand all the fees involved before taking out a loan.

5. Examine the processing and disbursement time

Knowing the processing and disbursement time for a working capital bank loan can help you to better manage your business finances.

For example, if you are expecting to use the loan funds to purchase inventory, you may need the funds immediately. Otherwise, you may end up losing out on sales. Similarly, if you are planning to use the loan funds to expand your business, you will need to know how long it will take for the funds to be disbursed so that you can plan accordingly.

Ending note

The working capital partner you choose can make or break your business. By following these five simple steps, you can choose the best working capital partner for your business growth. Do note that depending on the lender, the processing and disbursement time for a working capital loan can vary.

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Student. Award-winning communicator. Subtly charming coffeeaholic. Organizer. Gamer. A real dynamo when it comes to managing jack-in-the-boxes for fun and profit. Spent the 80's donating shaving cream in Libya. Spent 2001-2004 lecturing about Roombas in Jacksonville, FL. Garnered an industry award while getting my feet wet with sheep in the government sector. My current pet project is working on Slinkies in Orlando, FL. Spent 2002-2009 developing strategies for crayon art for the underprivileged.