Working Capital: When Does It Make Sense For Your Business

Every year millions of U.S. businesses utilize some sort of working capital product to help grow or sustain their business when they need additional cash flow to do so. Due to the natural risk that is present when lending what is essentially cash, working capital can be expensive — however, expensive doesn’t mean it can not be profitable or beneficial to your business.

Types of Working Capital

In the most simple terms, working capital loans fall into two primary categories:

• Secured/Asset-backed. These loans require a business to pledge assets, such as property or equipment. The lender is in a more “secured” position because the lender can seize the pledged assets in the event of default. With a lower risk to the lender, the lender offers a lower interest rate to the borrower.
• Unsecured. There is nothing for the lender to seize, which comes at a higher interest rate for the borrower.

If secured working capital is lower cost, why would a business ever obtain an unsecured loan? A lot of businesses either do not have the necessary equity in qualifying assets or they lack the time required to provide assets lists, get property appraised, etc. This can sometimes take weeks, if not much longer. Further, pledging assets can prevent your business from being as nimble as it possibly can be when their assets are tied up with bank liens.

TopMark’s Unsecured Working Capital

TopMark offers unsecured business loans in a very streamlined and transparent fashion. We understand that these loans are not for every business’ cash flow needs and if, at the end of the day, our financing does not help grow or sustain your business then nobody wins if we lend to you.

Because the loans are unsecured and naturally higher risk, the terms are kept short. Usually, our loans last 12 months or shorter, but on rare occasions we can go 18 months long.

The cost of financing is fixed and transparent. From day zero you know exactly the total cost of the loan, so you can make the proper return on investment analysis to see if it is the right choice for your business. The monthly interest charge is based on the credit quality and risk, and runs a span of approximately 2% to 5% of the total initial loan amount (monthly).

For example, a $50,000 loan with a 3% fixed monthly fee would charge $1,500 monthly in interest.

Because there are no assets being pledged, the process is fast. Generally, from application to cash in your bank account it takes about 2 to 3 business days. We have, on many occasions, completed the financing the same day for our clients.

When you loan with TopMark Funding, you get:

• Loans from $20,000 to $250,000
• Terms from 6 to 12 Months
• Daily, Weekly, and Monthly repayment options
• Fixed Interest Fee
• Early payoff discounts
• No hard credit inquiry to qualify
• Same day approvals, next day funding

Adding Value to Your Business

In general, our working capital loans can add value to your business when:

1. The working capital loan can be directly tied to increased revenue and profit for your business — that is greater than the cost of the loan itself. In this situation the loan is a cash-flow-positive decision for the business.
2. The working capital loan will help sustain your business, most commonly due to unplanned situations where an immediate cash injection is required to keep operating as normal.

Here are two examples where we helped finance working capital for businesses, and one where we did not.

Return on Equity

A fleet transportation company we worked with before had the opportunity to pick up 3 additional dedicated lanes with a well-known Fortune 500 company. Our client needed a quick cash injection to hire drivers, and also pay for the additional expenses associated with the additional trucks they were putting on the road. The revenue and net income from the new lanes made it a no-brainer.

Staying Afloat in Troubling Waters

A client of ours that is in the construction industry received a very expensive and, unplanned, tax bill in the mail. They needed to get the bill paid asap as they didn’t want any tax liens burdening the company’s ability to secure high profile government contract jobs. They used our working capital loan to quickly pay the tax bill quickly, without tying up any of their assets with liens.

Not Always a Good Idea

We had a recent client, whom we have helped finance many different pieces of equipment for their business over the years, recently reaching out to us for a working capital loan.  They were interested in consolidating company credit card debt. Because consolidating this debt did not have a positive impact on the company’s revenue nor would it help sustain their business (or save it from an emergency) — we advised them against taking out a working capital loan with us. 

Conclusion

If the math checks out for you, a working capital loan can be a great way to increase your net income and a better return on your equity. Give us a call today to discuss any working capital or equipment finance needs your business has.

Give us a call today at (866) 627-6644 to discuss any working capital or equipment finance needs your business has.

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ABOUT TOPMARK FUNDING

TopMark Funding is a top-rated semi-truck financing and equipment financing company located in Roseville, CA. We specialize in commercial trucking and heavy equipment. Our mission is to become your long-term financial partner by helping you grow your trucking business and fleet.

We’re not here for the short-term, we’re on the long-haul with you!

We have financing options for semi-trucks, commercial trucks, trailers, and small businesses. We have great rates, low down payments, and flexible monthly payments regardless of credit history.

Learn more about: Semi-Truck Financing

Fill out the contact form or give us a call at (866) 627-6644. One of our truck financing specialists will contact you as soon as possible to go over your truck lease needs and learn more about you and your business financing goals.