Now that we’ve built a foundation for understanding the lending landscape, let’s explore the financing options available to business owners.

The working capital of a business is its lifeblood, funding day-to-day operations such as paying employees, ordering supplies, and making loan payments. You can calculate working capital as the difference between your current assets and current liabilities. With more working capital, your business can be more efficient and respond quickly to opportunities or challenges.

Increasing your short-term working capital can allow you to take advantage of opportunities like expanding your team, or it can help you overcome challenges like needing to replace a company vehicle. But how can you increase your working capital in time to meet your changing financial needs? What are your options for financing, and how do you know which is best for you?

What Are The Different Types Of Financing?

Businesses can secure financing through short-, medium-, and long-term solutions. Typically, short-term financing has a repayment period of one to two years, medium-term solutions can be repaid over two to five years, and you would have 15 to 20 years to repay a long-term financing solution. Another key difference between long-term, medium-term, and short-term finance solutions is how much money you can borrow. On average, longer-term options will have higher ceilings for how much money you can borrow compared to shorter-term options.

When Should I Use Short-Term Financing?

Short-term financing is often considered if you need funds quickly to capitalize on a fleeting opportunity or to cover unexpected costs. Still, each situation is unique, and knowing the pros and cons of short-term financing will help you make the right decision.

Advantages of Short-Term Financing

• Shorter application process.
• Easier to get approved.
• You get your money quicker.
• Improves your credit score.

Disadvantages of Short-Term Financing

• Higher interest rates at times.
• Stricter repayment policies.

What Are The Types Of Short-Term Financing?

When securing short-term working capital, you will usually be able to choose between six financing options. Your time frame and financial history will impact which solutions appeal to you.

Credit Cards

You’re likely familiar with credit cards from your personal life. They can help finance your business while building credit, too. Some cards will even offer rewards like cash back, which you can add to your working capital. When choosing a credit card for your business, try to find one with little to no annual fees and interest rates.

Trade Credit

What is the most common form of short-term financing? Trade credit. This type of short-term financing is built on the relationship between a business and its supplying firm. When businesses receive materials from their supplier, they usually do so on credit. Suppliers can incentivize expedient repayment with discounts.

Government Aid

Through the Department of the Treasury, the U.S. government offers financial assistance to small businesses. If your financial situation calls for tax credits, emergency capital assistance, or paycheck protection, it is worth seeing what programs you qualify for.

Credit Unions

If you prefer to do your banking locally, credit unions can be a viable option for securing financing. Credit unions are not-for-profit, so their accounts often come with fewer fees, and loans have lower interest rates than when working with a commercial bank.

SBA Loans

The Small Business Administration (SBA) is a government agency that offers financing options for small businesses. When applying for financing through the SBA, you’re not working directly with the government. Instead, vetted lenders review your qualifications to see what solutions you are eligible for. SBA loans can also include a cap on the total amount of interest you’ll pay over the lifetime of the loan. Unfortunately, it typically takes a minimum of 30 days to get cash in hand from an SBA loan.

Banks

Businesses can also rely on commercial banks for financing, although their business loans tend to have a higher interest rate than credit unions. Working with a commercial bank can also leave you waiting weeks to receive capital. For certain needs, that can be too late.

Fortunately, there are alternatives to loans that still offer a lump sum of cash with typically less hassle. OwnerCo and other online business loan providers can connect owners with short-term working capital solutions that put your money to work in a matter of days

Working Capital Solution

Whether seizing opportunities or overcoming challenges, businesses need working capital. Small- and medium-sized businesses can find both short-term and long-term finance solutions to be prepared for whatever comes their way.

To explore which short-term financing solutions are the best fit for your business, check out OwnerCo’s lending options. Our partners can help you access the right capital quickly and efficiently, so you can keep your business growing and ready for any opportunity or challenge.