Marlin Staff Writer

Working capital loans for small businesses act like financial bridges between times of strong, predictable cash flow. Available in smaller amounts than more traditional small business loans, working capital loans don’t lock you into long-term commitments. Some have terms of only a few months, allowing your business to cover daily operations, payroll obligations, rent, expansion-related financial outlays, and other necessary expenses. Working capital loans also tend to be easier to obtain than other small business or bank loans.

If you’re investigating the best ways to maintain a smooth revenue stream regardless of predictable and unpredictable market fluctuations, keep working capital loans in mind. However, remember that to make the most of these fiscal vehicles, you’ll want to stick with the dos and avoid the don’ts.

DON’T: Mistake a working capital loan for a line of credit.

Working capital loans and lines of credit can both be parts of your corporate money management strategy. Nevertheless, they’re unique solutions that shouldn’t be used interchangeably.

A line of credit allows you to spend up to a pre-authorized level of money, such as $10,000, $20,000, or more. Like a credit card, you incur interest when you buy something using your line of credit. A working capital loan for small businesses, on the other hand, is set at a fixed amount. It’s available in a lump sum, and the payback interest can be quite competitive without pledging additional collateral or assets to secure the loan.

DO: Use a working capital loan to fund growth or bigger projects.

Are you ready to scale or grab onto a terrific opportunity but need some financial fuel for the leap? A working capital loan can give you the money boost you need to cover the cost of hiring new employees, integrating new technology, renting more space in a commercial building, buying equipment, or educating your team members.

Why allow a lack of liquid cash to stop you from taking advantage of the possibilities presented to your company? Working capital business loans for small businesses give you the freedom to accept new jobs or grow your operations over time.

DON’T: Accept more financing than you need.

If you haven’t already outlined how you plan to use a working capital loan, do some planning. Otherwise, you might bite off more than you can chew in terms of a sizable loan that puts you at a cash flow disadvantage. Figure out where you’ll spend your money, as well as how you’re going to pay back the loan installments. Talk with your lender to determine repayment frequency and amounts.

Your financial representative, such as someone from Marlin Capital Solutions, should help you ensure that the working capital loan you’re borrowing is not too large. Ideally, you’ll want to feel secure about your organization’s ability to pay everything off in an abbreviated time frame.

DO: Use a working capital loan to mitigate seasonal or sudden fiscal hiccups.

Are you involved in a seasonal industry? Maybe your revenue peaks in the summer and winter but takes a dive every fall and spring, yet your expenses remain relatively flat. When you know sales will be low due to tepid off-season income, you can leverage a working capital loan to keep your business afloat and healthy.

The same premise holds true if you encounter unexpected cash flow interruptions, such as from global uncertainty or changing consumer behaviors. In those situations, a working capital loan can give you a bit of breathing room to regroup without shuttering your doors.

You deserve a partner, not just a lender.

As a bonus “do,” seek out a financial partner who won’t simply give you a working capital loan, but will also pay attention to your company’s one-of-a-kind needs. Every business has its own ebb and flow when it comes to working capital needs. A true financial partner will introduce you to resources and services that will work with your mission and vision.

Interested in learning more about a working capital loan to keep your business moving forward? Apply for a working capital loan online with Marlin today. In just a few minutes, you can find out if your organization is a good candidate for this type of dependable financial tool.