2. When to Get a Working Capital Loan | SME Guides

By
Writers@Aspire
Published
July 14, 2020

Working capital loan is designed to fund a company’s day-to-day operational expenses, such as supplier payments. These types of loans typically carry short repayment terms, not for financing long term business needs like large scale expansion projects.

Contents

  1. What is working capital?
  2. When to get a working capital loan
  3. Types of working capital loans
  4. Choosing a working capital loan

Depending on your business and the industry you’re in, there can be a variety of working capital needs. Below are common reasons why small business owners obtain working capital financing:

1. Capitalise on time-sensitive business opportunities

First, you will be better positioned to capitalise on business opportunities. Otherwise, you may have to pass on with external financing. That includes: making bulk purchases to take advantage of supplier discounts, or investing in expansion activities that’ll help your company grow.

2. Manage seasonal fluctuations

Second, it’s common for seasonal businesses to rely on working capital loans to even out their cash flow across all seasons. For instance, to prepare ahead for the busy season. A restaurant owner may obtain external financing to cover the costs of inventory purchases, marketing activities and hiring temporary staff.

3. Purchase equipment or software

Third, having up-to-date equipment and software can help bring about productivity gains for your company in the medium run. However, it may be too costly to bear upfront. Thus, working capital loans allows you to be able to obtain the tools you need without putting a dent to your cash flow.

To conclude, we aren’t referring to major equipment purchases as these purchases typically require long term financing solutions. We’ve included more information about distinguishing between short term and longer term financing needs in Part 4 of our SME Guide.

⇨ 3. Types of working capital loans

⇦ 1. What is working capital?

Frequently Asked Questions

No items found.

Get high quality finance and business content in your inbox

Get insights and resources on building & managing your finance team, your finance tech stack and growing your business
Subscription Successful! We'll share our best articles with you shortly. See you around!
Seems like something went wrong. Could you try again?

Join the fastest-growing community of finance leaders in Southeast Asia today.

Get access to exclusive events, curated networking opportunities and insights on building & managing your finance tech stack.
Join now
Aspire mobile app imageAspire mobile app image

Get high quality finance and business content in your inbox

Get insights and resources on building & managing your finance team, your finance tech stack and growing your business
Cheers! We'll share our best articles with you shortly. See you around!
Seems like something went wrong. Could you try again?

Explore the all-in-one finance solution built for finance teams

Save time and money with borderless payments, corporate cards, expense management, and more
Get Started