Should you consider a capital loan for your small business?

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By Samantha Higgins

You always want to make sure you have enough capital for your business. Without access to capital, you can miss payroll, experience supply disruptions, or cease operations altogether. You can get quick access to the funds you need with a capital loan designed to help you pay for your company’s day to day operations. Many businesses use capital loans to ensure that their operations continue to run smoothly. So, do you think that you need a capital loan? Here are five questions you should ask about your business.

1). How much cash do you have on hand?

According to most business experts, you need to have at least 12 months’ worth of working capital. Working capital is the cash on hand that a business needs to stay operational. You can calculate your business’s working capital by subtracting your business’s liabilities from your assets. If you have less than 12 months of working capital, then you may be in danger of going out of business if there is a major disruption in your operations. Therefore, you may want to consider getting a capital loan to keep your business afloat.

2). How healthy is the business environment?

When times are good, there never seems to be a problem with operating capital. After all, the economy is healthy, the money is rolling in and lenders are more than happy to loan you money at low rates. However, when things go bad, sales go down and lenders are less likely to approve loans. That’s when everyone begins to ask, “What is a capital loan?” You don’t want to be one of those business owners who wait until it’s too late. Therefore, you will want to take out a capital loan at the first sign of trouble. Don’t wait until there is a full-blown recession to try and get a loan. Stay well ahead of the curve and get that capital loan while lenders are still likely to approve your application.

3). How stable are your sales?

You want to make sure that your sales are stable or growing. If you begin to see any trouble in your cash flow, then you may want to get a capital loan to deal with any short term issues. You want to take out that capital loan while your business is in stable shape. Therefore, don’t wait until you are in big trouble before you try to take out a capital loan.

4). Are you facing increasing costs?

If your business is facing increasing costs, then you will want to consider getting a capital loan to prevent any slow down in your business. For instance, if your business involves deliveries and fuel prices are going up, then a capital loan will ensure that you can keep your fleet on the road. Carefully look at all of the costs associated with your business. Be ready to apply for a capital loan when one of your operational costs begins to eat into a significant chunk of your budget.

5). Can your business be disrupted?

You want to make sure that your business doesn’t get blindsided before its too late. Don’t think that your business can be disrupted? In the past five years, the taxi industry has been disrupted by Uber, hotels have been disrupted by Airbnb and FedEx, UPS & the U.S Postal Service have been disrupted by Amazon’s in-house delivery fleet. You never know when another company is ready to hurt your business. Therefore, you will want to get a capital loan at the first sign of industry disruption. A capital loan will give you the firepower that you need to fight off the disruption and stay in business.

Making sure that your business is well-capitalized

Working capital is the secret weapon that keeps business afloat during tough times. To see if you need working capital, know how much capital you have on hand. Also gauge the current health of the economy, the stability of your sales, operational costs, and potential disruptive threats to your business. By detecting any warning signs to your business early, you will be able to easily get the working capital that you need to not only survive but thrive over the long term.


Samantha Higgins is a professional writer with a passion for research, observation, and innovation. She is nurturing a growing family of twin boys in Portland, Oregon, with her husband. She loves kayaking and reading creative non-fiction.

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