Strategies for optimizing working capital loans

Strategies For Optimizing Working Capital Loans In Your Business

Working capital is a great short-term capital solution to help your businesses cover a variety of operational expenses. Utilizing working capital preserves your cash position and can be a good alternative to longer term financing. In this article, we share four working capital strategies for investing in your business.

What Is A Working Capital Loan?

Working Capital is a short-term, unsecured business loan that can be spent at the borrower’s discretion to cover expenses of any kind. This product is best utilized as a temporary solution to capital needs due to the favorable early payoff benefits, and the short-term nature of the loans. Many working capital lenders provide payoff options with large discounts on the interest charge, and terms are typically 4-24 months, minimizing the amount of interest accumulation.

Working capital lenders are primarily concerned with the short-term cash flow of a business when underwriting an application. Due to this, approvals typically are based on the amount of monthly deposits in your business bank statements over a 3 month span. Depending on market conditions, lenders may approve you for a loan between 80-120% of your average monthly deposits.

The final key characteristic of a working capital is that the submission and funding process is extremely quick. Most working capital fundings happen same day or next day. The typical submission only needs a 1-page application and the last 3 months of corporate bank statements. Once approved, the lender will request a copy of your drivers license and a voided check, then funds can be released!

Next, let’s look at the different ways businesses utilize working capital to support their business growth.

How to Maximize Returns from Your Working Capital Loan

Minimize the effects of seasonality on your business.

Many companies have cyclical sales and experience seasonality of revenue as a result. Working Capital loans can help bridge the gap during times of reduced business activity. For example, an agricultural company may only be able to harvest and sell certain crops a few times throughout a year. However, just because these businesses are not constantly producing revenue, there are still plenty of business expenses such as payroll, supplies, repairs to equipment, and more. Working capital is the perfect product to secure cash to address these short-term expenses. The same is relevant in other industries such as landscaping and construction; where seasonality can affect revenue, but ultimately business does not come to a halt.

Offer payment plans to provide another source of cash

Bridge the accounts receivable gap.

Depending on what industry you are in, your business may experience varying gaps between when you perform work or sell products and when you get paid. However, Financial obligations such as operating expenses, rent, equipment maintenance, inventory costs, marketing, payroll, etc., are going to come due regardless. When the accounts receivable due dates do not align with your expenses you may find yourself in a situation where you need cash quickly to bridge the gap. Working capital is a great product for this, as you can secure the cash quickly, and pay it back early with minimal penalty.

Common financial obligations infographic

Stock up on inventory and supplies.

Use working capital financing to take advantage of discounts from your suppliers; stock up on inventory and supplies to guarantee the success of your next project. Whether you are a restaurant looking to revitalize your offerings with new products, or a construction company looking to purchase materials for a new project, your business’ success is reliant on having sufficient inventory. Where an equipment loan would be your best option for any sizable hard asset that you plan on using for an extended period, that is not the case with inventory and materials. These items are not meant for multiple uses, and do not directly generate revenue for your business, but they are still crucial to its success. A short term loan with good early payoff options is the best way for your business to avoid accumulating interest on an asset you are only using in the short term.

Increase your customer base.

Expand and grow your business with working capital. This could mean investing in any of the following:

  • Marketing: Use a working capital loan to launch a marketing campaign and expand your client base.
  • Trade Shows: Use working capital to travel to trade shows and to give out materials like brochures, booklets, or branded items such as magnets or pens.
  • New Location: Working capital can be used to drive awareness about a new location.
  • Website: Having an easy-to-navigate, mobile-friendly business website is incredibly important in this day and age. Use a working capital loan to hire a web developer to update and improve your website. You may also want to find a freelancer or intern who can help you with blogging and social media posts.


Focus on SEO to drive traffic to your site

About Blue Bridge Financial

Founded in 2009, Blue Bridge Financial is a specialty equipment finance firm. Our Working Capital product offers quick access to capital and flexible repayment schedules. We work with businesses in 30+ industries and we can fund your business, too. Start the easy, one-page application for Working Capital today, or contact us with questions.

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