An introduction to a working capital loan

With many kinds of loans available to business owners, finding the right lender and loan can determine the right outcome. Traditional financial institutions offer working capital loans to business owners to meet their needs. However, since not all entrepreneurs can meet their requirements, understanding the other options available to obtain a working capital loan is essential. 

You can find different types of business loans, and working capital loans are one of the more common ones. A working capital loan can be smaller loan amount, making it a source of quick funding that needs to be repaid within 12 months or 24 months, depending on the lender.  

If you and your business have a good credit score, you may be able to get an unsecured loan. In some cases, a capital loan is secured by the business’ assets, which leads to better interest rates, but your credit score and other bank statements may still be required.  

Alternatively, if you own your home but have a less-than-ideal credit score and little financial history, you can access your property’s equity as a lump sum. Since you can use home equity loans for your business, you can get them from alternative lenders.

Normally, the loans are used for daily business operations rather than long-term investments rather than for buying business assets.  

Using a home equity loan as working capital financing gives you usage flexibility, which means you can deploy the funds into any part of your business including as working capital. Instead of assessing your personal credit history or the business’ financial standing, your eligibility for a home equity loan depends on how much equity you have in your property.  

If you have at least 25% equity, you could secure a high-value loan with your property that can you then use for your working capital and other business investments. 

The formula to determine your working capital is simple. Subtract your current liabilities from your current assets, and you have calculated how much working capital you have.  

The result will either be positive or negative working capital. If you have positive working capital, your business will have enough money for its financial obligations, but negative means you will need more funding.   

Current assets – current liabilities = working capital 

Home equity loans from Alpine Credits make one of the best alternatives to working capital loans. Unlike loans from traditional lenders, you do not need to provide your credit score or the business’ financial health. Business owners with at least 25% equity in their property are eligible for a home equity loan to use towards their entrepreneurial goals.  

By getting a home equity loan, you get some of the same benefits as a working capital loan and unique aspects of home equity loans. Interest rates are comparatively lower than business loans or business credit cards with a home equity loan, and they offer just as much flexibility. You can promote your business growth because home equity loans offer more than enough cash.