Types Of Working Capital – Finding The Right Fit For Your Business Financing Needs.

In today’s difficult lending arena, many types of working capital that were available only a  short time ago have been severely cut back, or restricted altogether. Many of the larger commercial banks are “sitting on their hands” taking advantage of the cheap money provided to them under different government programs and not necessarily lending this money back out to small business that have immediate working capital needs.

Despite the fact the government has increased its support for the Small Business Administration or SBA, this option is still extremely hard to qualify for given today’s lending environment. Many businesses are considered “credit challenged” due to the downturn, it has become increasingly difficult to replace lost lines of working capital cash that banks were previously competing to sign businesses up for.

However, even in this difficult lending environment, there are options for the savvy business with alternative types of working capital. The key to many of these loans is to have a decent credit card processing volume and cash flow that is verifiable. Most companies will want to look at your most recent 4-6 months worth of statements.  These so-called merchant cash advances, which advance an amount against your future credit card receivables, are hallmarked by flexible underwriting and terms, as well as higher rates to compensate for the increased risk of lending to small business.

On the flip side, these cash advances are short term and usually last no longer than 1 year, with payments being made daily out of credit card proceeds. They also can handle difficult credit situations that many banks and business loan companies would not even consider. Keep in mind you may need to switch processors and/or pay upfront fees as a condition of receiving this type of working capital cash.

There is also a new, more cost effective option called a credit card receivable loan that can handle businesses with a predominantly cash or credit income stream and features rates that can be as much as 50% less than a comparable cash advance with no upfront fees or requirement to switch credit card processing companies, but can also handle the credit-challenged business that needs a working capital term loan that is both cost effective and flexible.