Working Capital Loan Atlanta GA

The working capital loan is a short term loan known to help tide over a financial crunch which a business organization faces. A working capital loan can be used to help steady a business that is experiencing financial trouble. Working capital loans are ideal for the sustaining of a business in Atlanta. It helps stabilize a business and pulls it out of its shaky confines. The working capital loan can pump in the cash flow and fund the daily operations of your business.

Companies which are growing fast and furious are more prone to capital shortage and are in need of working capital despite reflecting huge amount of profits on paper. This is because once these businesses rake in money, they need to invest more money on continuous improvements and innovations for their current set of products and also diversify into other product lines. These companies also have to pay for infrastructure, advertising campaigns, marketing promotions, new machinery and also meet expenses of day to day nature like rent, bills and employee salaries. To set the wheels of the business running, one cannot escape the fact that the working capital is very important for the progress of the business. When the time arises, a business can rely on a working capital loan to get the cash they need.

Working capital loans can be both secured as well as unsecured. If your working capital loan is given to you against an asset as a security or a personal guarantee, it is known as a secured working capital loan. The asset can be a house, an office or an inventory. It does not matter if these assets are fully paid up or if they have an outstanding loan amount to be paid. The bank or the financial institution asks for the amount of assets based on their decision about your ability to repay the loan. Some times for secured working capital loans, the lenders can also ask for personal guarantees where the borrower must be ready to put up their own personal assets like their own home, shares and stock certificates.

Secured loans are normally given a green signal by the lenders because of the collateral factor. The borrower also stands to get the best rates as far as interest is concerned. Additionally the repayment terms are easy and flexible in case of secured working capital loans. Secured loans are an excellent resource for businesses and are fairly easy to obtain when a business is in need of working capital.

Unsecured working capital loans are only given to borrowers who are considered low or zero risk. Start-up businesses are quite risky and are mostly refrained from being granted an unsecured loan. As there is no collateral to back up the repayment of an unsecured loan, the risk involved is on the higher side. The loan providers charge a higher rate of interest in order to balance the risk factor. An unsecured loan does not guarantee that the assets will be spared in the case of non-payment of the amount to the lender. However, the loan provider will not be able to stake a claim for the liquidation of assets directly. He will have to take the legal course to recover the unpaid amount. It is an expensive and time consuming method. Furthermore, unsecured loans have to be repaid only after the secured loans are repaid.

There are many different types of working capital loans. It is ironical that different banks use different terms to describe the same type of loan. Here are some common types of working capital loans.

1. Line of Credit/ Overdraft: You can avail of an overdraft facility to draw funds beyond the available limit of your bank account. The maximum amount you can overdraw is your line of credit. The equation you share with your banker and his assessment of your credit worthiness can determine the term and the amount of money you can withdraw. The interest rate is usually charged 1-2 percent over the bank's prime rate.

2. Short-term loans: They are almost synonymous with working capital loans. Contrary to an overdraft, a short term loan has a fixed payment period which is usually for up to a year. The interest rate is also usually fixed on this form of working capital loan. Short terms loans are generally secured wherein you are granted the finance against collateral. However if you enjoy a good reputation in the market, have a good credit history or share a pleasant relationship with the bank, you may be offered a short-term loan without a security.

3. Factoring/advances: These are loans based on confirmed sales orders or account receivables. Accounts receivable implies the amount of money that you have billed the customer but have not received the payment. If your customers are reliable and reputable, the lending company will be able to raise the working capital for you. If your business accepts credit card payments, then you can sell the future receipts to raise cash.

4. Equity: These funds can come from your own personal resources like the home equity loan, a relative, a friend or an angel investor (third party investor with business experience relevant to your company)

5. Trade creditor: He is a creditor who may be willing to extend terms to meet a big order.