At Direct Capital, we see business owners who want to make improvements to their company and chart a course of success. Often, they’re able to accomplish this thanks to working capital loans, which are the useful shapeshifters of the finance world. Depending on your need, a working capital loan* can morph into a salve for a cash flow problem or a way to bolster your marketing budget. The sky can be the limit, usage wise.
What many small business owners don’t know if that you can often pick the length of the payback on a working capital loan. That means that if you think you can pay it back in six short months, that’s an option. If you need eighteen, hell, go for it. It truly is one of the most flexible financial products on the market today.
Today, I wanted to take a moment and explain why going for the longer payback term might be in your business’s best interest.
Taking a long-term working capital loan allows you to get the money immediately and set about taking care of the projects at your small business. It also allows you to avoid large payments up front, something that’s attractive to most business owners.
It also limits the stress, I’ve found. For business owners who have a relatively modest monthly payment to make, it’s going to allow you to focus on using the working capital and improving your business without the very real hassle of wondering where large payments are going to come from.
Just in case you thought we were unduly biased, I will list the one drawback to waiting longer to pay back the loan, one that’s probably familiar to any of you who have taken out a loan in the past. It’s the additional money you’ll need to pay back.
This advantage can be overcome or simply ignored if you’ll wind up having the capital to pay for it, but it’s important not to lock yourself in to a long-term payment plan if you think you won’t be any better off by the end of it. Just keep that in mind.
Next time out, we’ll talk about the advantages of taking a shorter term lease or loan. What are your thoughts about working capital loans?
Photo credit to iStock
*Working capital not available in the following states: AK, DE, ND, VT