6 Working Capital Financing Options for Your Business

Working capital is a necessary part of a successful business. If your business lacks working capital, your enterprise is headed for tough times. Working capital provides a means to finance the day to day expenses of a business, so it is important to maintain a good source of working capital. If your business does not have a ready supply, there are a variety of financing options for your business to take advantage of.

#1: Merchant Cash Advance Financing

This kind of working capital financing provides capital by collateralizing future credit card sales. Every day after investing in this financing, the lender will take a set percentage out of your credit card sales until the fees are repaid. This type of financing does not require any hard collateral, but it does require a good business credit history.

#2: Credit Cards

Credit cards are the most commonly used source of financing in business, due to their on-demand cash and ability to pay back over a longer term if needed. However, credit cards often have ridiculously high interest rates, especially if you are taking out a cash advance, or make a payment late.

#3: Business Line of Credit

Similar to a home-equity loan, minus the collateral. With a business line of credit, you don’t actually have to start repaying the loan until you draw on the line of credit. As you pay back what you spent, your credit line goes back to its original credit limit. The only downside of a business line of credit is that it is very hard to obtain without an outstanding business credit history.

#4: Invoice Financing

For invoice factoring, a third party company pays you whatever the value of your invoice immediately. You receive the money right away and repay over 12 months, while overseeing the invoices personally so your customers have no idea you used a third-party.

#5: Trade Credit

Also known as “vendor credit,” trade credit is a very common form of working capital used by businesses. Many vendors, instead of providing you with a net 30, net 60 or net 90-day repayment, allow you to carry a balance.

#6: Factoring

This type of working capital includes a factoring company buying your business’s outstanding credit for a percentage of their face value. Then, the company sends you the money, minus their fees. This is an excellent way to get money quickly; however, you will never be able to obtain your full amount owed in your invoices because of the fee taken out.

If your business is in need of working capital financing, consider these 6 options. Each option benefits different businesses in different ways, so before deciding, take into consideration how your business woks and what would benefit it most.


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