May - SME working capital loan

What are Your Working Capital Loan Options?

Undoubtedly, the business world has seen numerous changes over the years.

For one, starting a new venture nowadays has become relatively easier.

This is especially true for businesses that are mostly or wholly operating online.

However, even with the birth of the Internet, a few time-old hurdles remain like securing working capital.


If you are looking to secure additional business financing, some of your likely options include the following:

Bank overdraft facility or credit line

One advantage of this type of SME working capital loan over the others is that it allows the borrowers to only pay for interest applicable to the amount overdrawn.

Rates are usually set at 1 to 2 percent above the prime rate of the bank.

Accounts receivable loans

Nowadays, businesses have the option to secure a working capital loan based on the company’s accounts receivable or confirmed sales order.

This kind of SME working capital loan is often considered ideal for businesses that lack the needed funding to fulfil a sales contract or an order.

However, accounts receivable loans are often only given to established businesses and those that already have a proven track record of paying debts and fulfilling obligations on time.

Trade creditor loans

This type of loan is often given by potential or present suppliers.

Majority of the time, suppliers will offer businesses that place bulk orders a trade credit facility.

However, before loans of this type are granted, trade creditors will have to go through over the prospective borrower’s credit history first.

Factoring or advances

This kind of loan has a few similarities with the accounts receivable loan.

One difference however is rather than confirmed orders or accounts receivable, the value of the loan will be based on the company’s future credit card receipts.

Factoring or advances is often ideal for businesses that accept credit card payments.

Equity funding via personal resources or investors

Loan of this type are obtained from personal sources like home equity loans and investments from friends or family.

This type is often recommended for those businesses that are just starting out.

Equity loans are also deemed a wise option for businesses that don’t have a favorable credit history.

Short term loans

Short term loans come with a fixed interest rate and payment period.

This type of secured loan also has a repayment period of 12 months.

However, for those companies with a good working relationship with the creditor or a good credit history, short term loans are sometimes granted sans collateral.


After you have decided on the right working capital loan to apply for, oftentimes, the next hurdle would be to get the creditor’s nod.

Below are some of the effective ways you can hasten approval:

Ensure you have credible financial records at hand.

While it is unfortunate to note, not many realize the significance of keeping and presenting clear, credible, and accurate financial records.

Business owners need to remember that presenting the needed financial records will not only hasten approval but it will also help show that you have a superb financial system in place.

Be ready to answer questions from the creditors.

Aside from the documents that need to be prepared, it will also work to your advantage to have ready answers to questions prospective creditors will likely ask.

In most cases, it will include why and when the money should be lent and how it will be used.

Apart from providing figures, it will be a good idea to showcase your passion for the business and the lengths you are willing to go to succeed.

Securing that much needed additional funding can seem like a complex and challenging task at first glance.

However, nothing can be farther from the truth.

Given that you comply with all the things needed, do the legwork, and come prepared, you are already a step closer to securing that financing you so badly need.

Considering getting additional business financing? Visit today!



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