Keeping the right amount of operational capital on hand can be tough for businesses that depend on seasonal demand or invoice billing models. If you are looking for ways to bridge the gap between today’s operational costs and cyclical or inconsistent income, you might want to consider a term loan designed just for that purpose. Unlike credit lines and cash advance products, business loans for working capital have predictable, familiar structures with easy to calculate bottom-line costs.

Terms, Rates, and Approval Times

If you use term loans secured with existing assets instead of cash advance financing, you can usually count on interest rates between six and ten percent. Unsecured loans from hard money lenders are also available in many areas, but they have interest rates up to 25 percent depending on the applicant’s credit score and income. The good news is that working capital loan approval times are quite short compared to loans for business acquisitions or major asset purchases.

Since they use the equity in your existing assets, the value is easy to calculate. You just need to make sure you have a clean business credit record and the income to support the loan. Depending on whether you use a bank or private lender, approval times could be anywhere from five days to about three weeks. Most business loans for working capital have terms between three and seven years, but you might find alternative lenders with shorter-term loans available as well.

When To Apply for Operational Capital Loans

It’s never a great idea to wait until you actually need the money to meet costs before applying. Instead, look at the burn time you have in your reserve cash as you near the end of your normal operational cushion. Try your best to apply while the regular operational budget is eating through its cushioning, that way if you do have to dip into reserves you do so minimally. Then, if something happens that you really need to dig deep for, you will have the capital from the loan as well as the reserve capital from your company’s savings.

Repeat Financing With Operational Business Loans

Since operational loans tap into your asset equity to provide large sums of capital, they can be used for everything from supplies and process costs to acquiring the equipment assets you use to do your work. As your regular income allows you to repay the loan, you can prepay easily to save on interest costs over the term by shortening it. Then, when you need another large influx of capital to manage your operations for a year or more, all you have to do is refinance using asset equity once again.