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How to Get Working Capital for Business

Published June 21st, 2022 by Cornerstone Capital Advisors

You’re ready to expand your business’s services, purchase new equipment, or even start a new location. There’s only one problem - you don’t have the working capital to do it. 

So what can you do to increase your working capital?

You could start by reducing your debt and cutting unnecessary expenses, but that will only get you so far. The best way would be to borrow to increase your capital.

In fact, that’s what over half of business owners have been doing - borrowing to increase their working capital. 

Fortunately, you have multiple ways to borrow. Here’s how to get more working capital for business - and the pros and cons of each solution.

Use Business Credit Cards

Business or corporate credit cards can be a good way to get access to short-term working capital. If your small business is already established, or if your personal credit is good, it’s likely you can qualify for one. 

Using a business credit card can be a quick way to buy necessities for your business, such as office supplies or furniture. You can also use them for travel expenses. These cards tend to offer a higher credit limit than most personal credit cards.

They can also be a way to help build your small business’ credit over time, possibly improving your future chances of receiving additional funding such as a loan further down the line. Some may offer rewards such as travel rewards, sign-up bonuses, and cashback.

However, business credit cards should be carefully monitored. Be wary of who in the company you are handing them out to and what they are using them for. Have strict guidelines in place for how they should be used.

They also come with the same issues as personal credit cards: high-interest rates, late fees, and security issues. 

Find Angel Investors

Angel inventors are high-net-worth investors who provide financial assistance to new businesses. This may be in the form of either a one-time investment or an ongoing series of investments. Angel investors like investing in innovative new businesses with the potential to grow beyond the startup phase.

The companies they invest in have shown potential for profit but require additional capital to grow. In many cases, the angel investor can be highly motivated to help your business succeed since their money is on the line. They may offer additional help, such as mentoring. 

The downside? Angel investors often offer their financial assistance in exchange for a share of the company, often in equity. Before approaching an angel investor, consider how much equity you want to give away in exchange for funding. Giving away too much means you may lose control of the company, especially if things go poorly with business.

Ask Friends and Family Members

The advantage of borrowing from friends and family members is that you can sidestep the credit approval process. It can be one of the quicker ways to get capital - especially without collateral. 

Make sure that both parties understand what exactly the funds are for. Is it a loan or a gift? A loan is expected to be repaid, and a gift may have tax liabilities.  

Either way, get everything documented in legal writing. 

However, while this is an option, in most cases, it is not recommended. Unless a professional, serious approach to paying back the loan is used, the relationship can go downhill very quickly. If you can’t pay back the loan within the specified time frame, relationships can be ruined. 

Finally, make sure your lender understands what role they will or won’t have in the business. A family or friend who gives or loans you money may expect to have a say in your business. Make sure that they understand what role, if any, they will have in your business.

Apply for a Small Business Administration (SBA) Loan

There are multiple types of SBA loans. The most popular is the SBA 7(A) loan, which can provide working capital for purchases such as real estate (both land and buildings), new constructions or renovations, and other purchases such as machinery, furniture, supplies, or materials.

SBA loans are a little different from traditional loans. You apply through a private lender who provides the financing. In turn, the lender applies for a loan guarantee through the federal government.

This means in the event of default; the government pays the lender a guaranteed amount. Depending on the type of loan, the guarantee could be as high as 85% of the loan amount. 

SBA loans are popular because they offer long terms, low fees, and competitive APR rates.

However, working capital lenders all vary in terms and requirements. Some may require collateral. Others may take as long as 60-90 days to approve your loan. 

Get Working Capital for Business Needs

Small business owners have lots of options to get working capital, but they’re not all the same. Every option has its risks and rewards. It’s likely you may even need more than one form of funding.

At Cornerstone, we understand the importance of working capital for business - regardless of the industry, you’re in. That’s why our SBA loans require no collateral, have a 10-year term, and have a transparent interest rate. 

Got questions about SBA loans? Or are you looking for financing for other purposes, such as mergers and acquisitions? 

Contact us and let us help you develop a strategy for your business.


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