Every business needs money to operate day-to-day activities. The money may not be available all the time in ample amount and thus in those circumstances, an additional help may be required. Working capital loans can prove a significant support to help businesses survive during the tough times.
Here are the technicalities that describe the importance and role and meaning of working capital loans.
What are working capital loans?
The working capital loans are designed to fulfil daily small needs of funds of a business to manage daily operations.
The loans can never be used for the long-term commercial purposes because the borrowing limit for these loans is always small and also the tenure is short. In other words, you can call them short-term business loans. Working capital loans are available everywhere in Ireland. Now after corona, the government also giving a back-up through these loans but the terms and conditions are uncompromised.
Features of working capital loans
Major features of working capital loans can explain their basic nature properly and you may plan your next borrowing with clarity on what they offer.
- The loan amount can vary though but it is normally €100 to €25000.
- The tenure is minimum 3 months and maximum can be 2 to 3 years.
- Fixed interest rate and flexible repayment plans in case of direct lenders.
- Prepayment can happen after 6 months in case of longer tenure
- Options of interest-only repayments are also available
- The mainstream lenders may ask for security if credit score is poor
- The loans are offered on the current repaying capacity
Types of working capital loans
There are the major types of working capital loans that cover most of the business related needs. It is almost a certain thing that working capital is the fuel for a company and the working capital loans keep pouring that fuel during a scarcity.
Besides the above types there are many more versions of working capital loans such as – supply chain finance/loan, trade finance, export finance, Equity funding etc. All the types are for different purposes but one thing that makes them resemble each other is friendliness to the poor credit situation of the business owner. It means if you are looking for the working capital bad credit loans in Ireland, it is not a big deal to find sundry relatable deals.
Pros and Cons of Working Capital Loans
For a good decision on the borrowing of working capital loans, it is important to know about both the sides of the coin. There are many thoughts about this type of finance option but the consensus is in the favour of the loans despite some cons. The final decision is obviously on your discretion, have a look and decide if you can relate with the borrowing option or not.
| Pros of working capital loans | Cons of working capital loans |
| Smoothen the cash flow | Smaller loans have no prepayment |
| Borrow on a lower rate of interest | Collateral may require in some cases |
| Uncompromised business operations | Missed payments cause poor score |
| Available on instant approval decision | Offers only a short-term support |
| No guarantor required to obtain funds | May prove addictive to some owners |
Uses of Working Capital Loans
Money borrowed through the loans is used for many purposes and some of them are common among all the business owners. It is very important to mention that there is no constraint of purpose on these loans and the borrowers can use the obtained funds for any cause.
- Buy inventory
- Pay pending bills
- Buy raw material
- Manage overhead costs
- Pay suppliers
- Pay employee salaries
What do you need to get the loans?
There is a set of requirements that one needs to fulfil to be eligible to get the loans without any complication and delay. With the help of several uncomplicated formalities, you can easily cross the gatekeeper and can reach to the funds.
- Your company should be registered in Ireland
- You have at least one year of business accounts
- your current obligations should be easy to manage
- Minimum annual business turnover should be €100,000
What are the alternatives to working capital loans?
The loan market is huge now especially with FinTech playing its versatile role through varied loan products. You can take short-term business loans, instant cash business loans, they both serve to the same purpose. To get money faster, it is better to consider direct lending because there you can borrow through 100% paperless procedures.
There is no second thought on the fact that working capital loans are useful and practically applicable on varied business situations. The loans can be used to tackle multiple types of circumstances. When no other help is available, working capital loans come forward to offer the support. Some lenders including OnlineCashFinances offers pre-approved loan offers.
