A business’s working capital is its lifeblood. Used to fund day-to-day operations such as paying employees, ordering supplies, and making loan payments, you can calculate your working capital by subtracting your current liabilities from your current assets. The more working capital you have, the more efficient and responsive your business can be.
Increasing your short-term working capital can allow you to take advantage of opportunities like expanding your team, or it can help you overcome challenges like needing to replace a company vehicle. But how can you increase your working capital in time to meet your changing financial needs? What are your options for financing, and how do you know which is best for you?
Businesses can secure financing through short-, medium-, and long-term solutions. Typically, short-term financing has a repayment period of 1-2 years, medium-term solutions can be repaid over 2-5 years, and you would have 15-20 years to repay a long-term financing solution. Another key difference between long-term, medium-term, and short-term finance solutions is how much money you can borrow. On average, longer-term options will have higher ceilings for how much money you can borrow compared to shorter-term options.
Short-term financing is often the best option If you need funds quickly to capitalize on a fleeting opportunity or to cover unexpected costs. Still, each situation is unique, and knowing the pros and cons of short-term financing will help you make the right decision.
Shorter application process
Easier to get approved
You get your money quicker
Improves your credit score
Higher interest rates at times
Stricter repayment policies
When securing short-term working capital, you will usually be able to choose between six financing options. Your timeframe and financial history will impact which solutions appeal to you.
You’re likely familiar with credit cards from your personal life. They can help finance your business while building credit, too. Some cards will even offer rewards like cash back, which you can add to your working capital. When choosing a credit card for your business, try to find one with little to no annual fees and interest rates.
What is the most common form of short-term financing? Trade credit. This type of short-term financing is built on the relationship between a business and its supplying firm. When businesses receive materials from their supplier, they usually do so on credit. Suppliers can incentivize expedient repayment with discounts.
Through the Department of Treasury, the US government offers financial assistance to small businesses. If your financial situation calls for tax credits, emergency capital assistance, or paycheck protection, it is worth seeing what programs you qualify for.
If you prefer to do your banking locally, credit unions can be a viable option for securing financing. Credit unions are not-for-profit, so their accounts often come with fewer fees and loans have lower interest rates than when working with a commercial bank.
The Small Business Administration (SBA) is a government agency that offers financing options for small businesses. When applying for financing through the SBA, you’re not working directly with the government. Instead, vetted lenders review your qualifications to see what solutions you are eligible for. SBA loans can also include a cap on the total amount of interest you’ll pay over the lifetime of the loan. Unfortunately, it typically takes a minimum of 30 days to get cash in hand from an SBA loan.
Businesses can also rely on commercial banks for financing, although their business loans tend to have a higher interest rate than credit unions. Working with a commercial bank can also leave you waiting weeks to receive capital. For certain needs, that can be too late.
Fortunately, there are alternatives to loans that still offer a lump sum of cash with far less hassle. Backd is proud to offer businesses short-term working capital solutions that allow you to put your money to work in as little as three days.
Whether seizing opportunities or overcoming challenges, businesses need working capital. Backd offers small- and medium-sized businesses with short-term finance solutions so you can be prepared for whatever comes your way. Backd can provide merchant cash advances ranging from $10,000 to $750,000 with term lengths up to 14 months. Here’s how easy it can be to fund your goals:
Complete Your Application: Applying takes just minutes. Owners with at least one year in business and earning a minimum of $300,000 in annual revenue, a credit score of at least 600, and who have at least 10 months of deposits in a business bank account are eligible.
Receive Your Decision: Once you complete your application, our team gets to work to see what solutions you qualify for.
Backd: If you’re approved, your funds will be available within 3 days.
Are you ready to take your business to the next level? Apply today