It is very usual for businesses to require working capital assistance at some point in their life cycle. Utilizing working capital funding though often seen as a phase of distress for the business but, in real life, it has often turned out as the primary source of funds for a business that’s venturing into positive growth as well as expansion.
Increasing your working capital levels can be used to fulfill large orders, invest in new markets or exploit other growth opportunities.
Business capital loans:
Business capital loans that are taken for the purpose of funding of business which is considered as it to be repaid with a required amount of interest. Business loans are like other loans where the lender sets the amount of interest along with the loan is to be repaid and also issues a promissory note which sets the agreement in writing with all the details. A security is usually to be provided before granting of such loans so that if there is non-repayment of the loan, the money can be retrieved easily through the security provided.
The statutory laws have made it mandatory for the interest of loans to be charged up to 10% per year which has made it easier for borrowers and saved them from the illegally high rates of interest charged by the lenders. There are also possibilities that a lender might sue a person individually if a person fails to repay the loan, depending on the business type. A person also requires a cosign for the guarantee of the loan.
Working capital loans:
These are a type of business loan which is re required for the funding of day to day requirements of the business. Example- Wages, Salaries of the employee, Rent, Electricity, etc. At times there is a shortage of cash and assets funding for handling day to day needs of the business and during those times the working capital loans turn out to be very useful. The duration of repayment of the loan is 6 to 12 months and the interest rates can be from 6% to 12% depending on the lender.
There are certain documents that are required for availing a working capital loan. The best part about such loans is that they help in meeting the capital expenditure of the business quickly. Also, it is a debt financing which doesn’t need any equity financing. Business with high credit rating can also avail unsecured loans where the need for collateral is not there. These loans are tied as a personal loan of the business owner’s credit and in case of any default, it will hurt his personal ratings.