September 9, 2015 By Suzanne Robertson

Are you an entrepreneur seeking growth and stability for your small business? One of the best ways to shore up cash flow and pay for expansion efforts is with a healthy infusion of working capital.

The SBA defines working capital as the difference between current assets and current liabilities. In short, working capital helps run day-to-day operations. It’s crucial to managing cash flow and can help scale your small business. Here are loan options to explore:

Traditional Bank Loans

Borrowers can turn directly to commercial lenders, credit unions and local banks for working capital loans. Banks are the largest small business lenders and probably the first place you think about when considering a loan. However, it can be difficult to qualify. In fact, a landmark study by Harvard Business School shows that bank loan availability to small businesses plummeted during the recession and has stayed at low levels since. About 72% of small business owners who apply get rejected. If you do qualify for a loan, repayment terms can be as short as one-year and as long as seven years. Working capital loans from a traditional bank are generally secured by some of the company’s assets.

SBA Loans

The 7(a) Loan Program is the Small Business Administration’s primary program for helping small businesses with financing. The SBA does not actually make direct loans; instead, it provides loan guarantees, promising the bank to pay back a certain percentage of your loan if you are unable to.

Frequently seen as the “gold standard” in small business loans, an SBA loan might have the longest-terms and lowest-interest available in the marketplace. SBA lenders look for applicants with good credit, a solid business plan, collateral, and a demonstrated ability to repay the loan.

The SBA loan process has a reputation for being cumbersome and slow but that’s not true if you work with SmartBiz Loans®. We’ve partnered with banks that provide SBA loans and we get you to a “yes” faster and easier by matching you with a bank most likely to fund. The SmartBiz platform is 100% online, making document collection much simpler than faxing, mailing or hand delivering paperwork. Loan seekers can pre-qualify with SmartBiz in as little as 5 minutes for a loan from $30,000 - $5 million. Funds can then be in your bank account in as fast as 7 days after your application is complete

Lines of Credit

Another type of small business financing available from banks and other lenders is a line of credit. Similar to a credit card, business owners can take out funds on an as-needed basis. Credit lines often have shorter repayment terms and are best for short-term working capital needs. The costs involved in establishing a credit line are one of the drawbacks. Up-front fees are required to establish the line and a business must pay interest on the money it uses from the line of credit.

Credit Cards

Did you know that 37% of small businesses use credit cards as a source of capital for their business? It’s quick and easy financing. But you pay for that quick and easy process. Business credit cards are unsecured loans so they carry a higher annual percentage rate than secured loans. APR can range from 12.9% to as much as 29.9%, depending on your credit score. Keep in mind that carrying a high balance on multiple cards can negatively affect your credit scores.

In Conclusion

As always, before seeking a loan or another source of funding, do your homework. Seek out transparency so you can determine the true cost of a loan including APR, all fess and additional costs. The key for working capital is to get the lowest cost funds available. Look for low a low APR and long terms.