What are Working Capital Loans and how do they work?

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A Working Capital Loan is a loan taken out by a company that is struggling to meet its daily running costs, the loan is meant to support the company by providing cash enabling it to pay the bills and finance the everyday essential 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 so 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. If a company is going through a difficult period the working capital loan can help them stay afloat but it is also useful to 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.


Advantages and disadvantages of a working capital loan

Advantages of a working capital loan
    • 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 a working capital loan
    • 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 working capital loan 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.

    The benefits of invoice finance companies such as Hitachi Capital
      • Boost your cashflow without having to wait up to 120 days for your customers to pay you
      • An invoice finance company with a revolutionary digital onboarding process, giving you quicker access to funds and the ability to take on new business remotely during this lockdown period
      • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled
      • No need to chase your invoices, we can do it for you
      • 6 month trial period followed by a rolling contract

Get a quote online or call 0808 250 0859

We will use your details to contact you in relation to this enquiry only.


We have revolutionised invoice finance with our digital onboarding process


We are an award winning invoice finance company

Best Invoice Finance Provider 2020

Best Factoring/Discounting Provider 2019

Best Invoice Finance Service 2018


4.7/5

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Please note that costs are an estimate only and are based on the entered values. Your final quote may change once a Business Development Manager has assessed your business in more detail.

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Why choose Hitachi Capital Invoice Finance as an alternative to a Business Loan

      • A 6 month trial period so you can be sure the product is right for you
      • Followed by a 6 month rolling contract – we don’t tie our clients in for long periods
      • A one fee solution with no hidden fees
      • Award-winning client service by our team of expert Client Managers
      • Our Relationship Management team are in the field to visit you in person
      • We are part of Hitachi Capital (UK) PLC, a company that is going from strength to strength – we’re here for the long term.

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Find out how we are revolutionising the way UK SME's access cashflow finance.


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Contact our friendly UK advisors on freephone

0808 250 0859

08.45 - 17.15 Monday to Friday