Working Capital Loans

How do working capital loans work and is it the right loan solution for your business?

A working capital loan is a loan taken out by a company that is struggling to meet its daily running costs. The loan supports the company by providing cash, enabling it to pay the bills and finance the short term operational costs of the business. These short term costs can include payroll, rents, debt repayments, in other words daily expenses that keep the company afloat.

The loan is not for the purchase of long term assets or for investment purposes.

How do working capital loans work?

Working Capital is essential for the success of a business and any business can go through phases where bills are difficult to pay. A working capital loan works by providing cash to a business to support its short term operational needs and this cash can help in a variety of situations.

Is a working capital loan right for my business?

If your business is going through a difficult period a working capital loan can help you stay afloat, but it can also enable businesses that have more cyclical sales to survive through periods where business activity is low, thereby allowing them to plan and prepare for periods where sales are high.

What are the advantages and disadvantages of working capital loans?

Advantages of working capital loans:

  • The loans are easy to obtain and you generally don’t have to state the purpose of the borrowing
  • Cash becomes available to a business when it is experiencing cash flow problems
  • The lender does not take equity and therefore you retain full control of your company
  • A high credit rating means you can often obtain an unsecured loan therefore reducing risk to your home, premises or equipment
  • The debt can be repaid quickly so if it’s short term help that’s needed you’re not looking at long term repayments
  • The lender will place few to no restrictions on how the business spends the money to keep itself afloat

Disadvantages of working capital loans:

  • The loan must be repaid regardless of whether it has kept your company afloat or not
  • The interest rates are likely to be high especially if you are able to get an unsecured loan
  • You may need to put up collateral to obtain the loan which may mean the loss of a home or other important assets if the business fails
  • As the loans are designed to deal with short term difficulties with cash flow you may have to repay the loan quicker than you’d like
  • Missed payments are likely to affect credit scores which may cause problems for future borrowing

Have you thought about Invoice Finance as a cash flow solution for your business?

Invoice finance allows you to release cash quickly from your unpaid invoices.

As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.

We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.

Get in touch

Contact our friendly UK advisors on our freephone

0808 250 0859

8:45 - 17:15 - Monday to Thursday &
8:45 - 16:45 - Friday

The benefits of invoice finance companies such as Novuna Business cash flow

  • Boost your cash flow without having to wait up to 120 days for your customers to pay you

  • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled

  • Access funds within 24 hours from initial appointment with our revolutionary digital onboarding process

  • Benefit from our in-house credit control processes, allowing you to focus on running your business, instead of chasing clients for payment

  • 6 month trial period followed by a rolling contract

Want to understand more Cash Flow Finance terms?

Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.

We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.

Let's talk

Please complete this form and one of our friendly advisors will call you back.

If your customers are consumers, please contact our consumer finance division.

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