Technically, working capital refers to the amount of money you have left after cashing in your assets and settling your liabilities within a period of 12 months. It is important that you have a positive working capital to keep the business functions up and running. Securing a working capital loan will ensure that you always stay in a better position financially and maintain the normal flow of your business operations.

Generally, working capital loans involve a shorter repayment term, which can range from three months to one year. This means that the interest accumulated on the loan would be much smaller than other traditional business loans. That is why working capital loans can be a great option for small businesses to make the most of during downtime.

Downtime can be experienced by any business at any time, so being ready for the hard times will always be a wise choice. This is especially true for seasonal businesses, such as those that make most of their income during the holiday season or any specific time of the year. A working capital loan can help such businesses manage their operations smoothly even when they are not making any sales.

Besides downtime, there can be many other financially tough situations where a working capital loan can help. For instance, if one of your biggest clients drops off or if you face some kind of a lawsuit, this can have an adverse effect on the financial state of your company. However, when you have positive working capital at hand, you can deal with such scenarios easily without having to run in all directions to get some business funding.

You can also use a working capital loan to pay off your short-term debts so that your business continues to stay in a healthy place. This will also help you to focus on the growth and expansion of your company. As your business capital remains positive with a working capital loan, you can have peace of mind and make thoughtful decisions to take help take your company to new heights.

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Short-Term Loans

This is the most common type of business funding these days. Working capital in the form of short-term business loans is easy to acquire, involve comparatively fewer costs, and can be used for a wide range of purposes. These loans give the borrower access to a lump sum that is to be repaid usually within 3 to 18 months.

Lines of Credit

This is one of the most flexible options for business funding. This financing option offers the borrower access to a pre-defined amount, which can be used as and when needed. Working capital in the form of a line of credit can work best for small businesses, as they can have it as a backup in case their revenue goes down.

Merchant Cash Advances

Working capital loans can also be sourced as merchant cash advances. Here, the lender would fund the borrower a fixed amount in advance in return of a definite share of the projected credit card sales of the company. This is the easiest way of securing business funding these days, but it could involve comparatively more interest rates.

Invoice Financing

This is the simplest way of acquiring working capital funding for a business. Invoice financing can be a great way to manage the daily operational costs where customers are usually late to pay their outstanding invoices. This can work to free up the business capital and cash flow that can be used to maintain business operations.

SBA Loans

A short-term loan secured by the Small Business Administration can be a great source of working capital. The SBA 7(a) loan program especially works well for acquiring working capital for small to medium businesses, which gives them access to funding ranging from $5,000 to $5 million that can be used for a variety of purposes.

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SBA Business Physical Disaster Loans

This loan program is designed by the SBA to help businesses replace or repair the damages in their property that are not covered by insurance. The loan amount available with an SBA Business Physical Disaster loans can go up to $2 million and the interest rates usually range from 4% to 8%. The loan term can be as long as 30 years with monthly repayment schedules. However, in order to qualify for the funding, your business should have suffered physical damages because of the disaster as well as be located in an SBA-recognized disaster area. Not only that, but you should also have a personal credit score of 600+ and pledge collateral in order to qualify for the loan.

SBA Economic Injury Disaster Loans

This program is designed by the SBA to offer working capital loans to businesses affected by a disaster. It involves short to medium terms, and the interest rate on the loan amount is usually set at 4%. The funding is aimed at helping businesses that have experienced considerable economic damages and can offer up to $2 million to meet with their standard operating costs. Note that in order to qualify for the SBA loan, your business must have suffered a significant financial loss because of the disaster. You should also be able to show your ability to repay the loan to get the funding approved by the agency.

SBA Military Reservists Economic Injury Loans

This loan program is designed by the SBA to help businesses cope with their loss of revenue when one of their main employees is called up for active military service. The agency offers up to $2 million to meet with the normal operating expenses in such cases. The interest rate on the loan amount is generally set at 4% here and it involves short to medium repayment terms. In order to qualify for the funding, your business should have suffered the loss of an important employee because he/she was called for active military duty, and his/her absence led to an inability to meet your company’s day-to-day operational costs.

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Although the idea of giving over a certain percentage of the business profits might seem intimidating, it can be beneficial in many aspects. Below is a quick guide to help you determine whether revenue-based financing would be the right choice for your business.

The Principal Amount and Financing Rates

You can always expect a big loan amount when it comes to revenue-based funding. This is because it is considered a long-term commitment with monthly repayments and financing companies often look forward to building a relationship with startups to offer further support as the business continues to grow over time. 

The financing rate here will be expressed in repayment caps, a figure which is multiplied with the principal loan amount to come up with the final debt value. As revenue-based financing is long-term, the repayment caps usually go from 1.35 to 3.0. The amount is typically determined by the financing company by evaluating both the possibilities and the scope of the business. 

Financing Requirements and Repayment Terms

Most of the financing companies offering revenue-based funding only work with specific types of businesses. This is because financing companies carefully assess the potential of the business before investing in it because they are expecting repayments from a fixed share from its profits. In other words, they calculate the loss percentage well before offering any loan.

As for the repayment terms, the monthly amount would vary depending upon the revenue of the business. For that reason, there are no predetermined repayment terms when it comes to this form of business funding. It is also important to note that financing companies usually require around 2 – 10 percent of the business’s monthly proceeds until the full loan amount is repaid. 

The Benefits of Revenue-Based Financing

The most favorable benefit of revenue-based funding is that you do not need to back the loan with any of your personal assets or collateral. By going with revenue-based funding you also do not have to take the predetermined fund all at once and can borrow the capital gradually as your business grows. 

One of the other main advantages of revenue-based financing is that there is no risk of the dilution of your company. What’s more, as there is no equity loss here, no formal valuation of the company is required either.

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Protecting your Business against Lawsuits

• You need to be very cautious when making any public statements or doing any business that could be considered questionable. As you carry the business image wherever you go, your focus should be to avoid all kinds of slanderous comments, possible conflicts with competitors, as well as poor business practices. In fact, you should make sure that your employees also follow the same rules.
• You should talk to a reliable attorney as soon as you launch your startup and have them on your speed dial as a legal backup in case someone sues your company. It is recommended that you secure an attorney who is experienced in dealing with business lawsuits in your area and knows the local laws well in order to help your case. The attorney should also have a good track record of winning cases in court.
• Always keep your personal finances separate from your business assets and finances. This will ensure that no business lawsuit will affect your house or personal assets and that no personal lawsuit can affect your business operations. Instead of registering the company as a sole proprietorship, you can have a trust own the company or find a partner before launching your startup business.
• Secure liability insurance for your company. Liability insurance will protect your business from slip and fall lawsuits. That being said, you can also build protection into the company contracts to insure yourself against any liability. This can be helpful if any uncontrollable act, like negligence of a supplier, ends up affecting your business operations and breaches contract. You can also include all the probable clauses and legal phrases in the work contract in order to keep your business safe from any potential lawsuit.
• You should keep all the data stored on your computers secured at all times. It is mandatory for every business to implement robust strategies in order to secure the data on their systems, as any data loss can prevent workers from completing contractual work. While installing updated antivirus and anti-malware software can help to lower the risk of data loss because of a virus, you should also invest in having other security measures installed to avoid any sort of data theft.

The post How to Protect your Business against Lawsuits appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

Protecting your Business against Lawsuits

• You need to be very cautious when making any public statements or doing any business that could be considered questionable. As you carry the business image wherever you go, your focus should be to avoid all kinds of slanderous comments, possible conflicts with competitors, as well as poor business practices. In fact, you should make sure that your employees also follow the same rules.
• You should talk to a reliable attorney as soon as you launch your startup and have them on your speed dial as a legal backup in case someone sues your company. It is recommended to secure an attorney who is experienced in dealing with business lawsuits in your area and knows the local laws well to help your case. Besides, the attorney should also have a good track record of winning cases in court.
• Always keep your personal finances separate from your business’ assets and finances. This would ensure that no business lawsuit would affect your house or personal assets and that no personal lawsuit would affect your business operations. Instead of registering the company as a sole proprietorship, you can have a trust own the company or find a partner before launching your startup business.
• Secure liability insurance for your company. This would protect your business from slip and fall lawsuits. At the same time, you can also build protection into the company contracts to insure yourself against any liability. This would be helpful if any uncontrollable act like negligence of a supplier affects your business operations, which breaches a contract. You can include all the probable clauses and legal phrases in the work contract to stay safe from any potential lawsuit.
• You should keep all the data stored on your computers secured at all times. It is mandatory for every business to implement robust strategies to secure the data on their systems, as any data loss can prevent them from completing contractual work. While installing updated antivirus and anti-malware software can help to lower the risk of data loss because of a virus, you should also invest in having other security measures installed to avoid any data theft.

The post How to Protect your Business Against Lawsuits appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.