How to Get Working Capital for Your Organization
By Terry Masters,
If your business is established and has good credit and references, it can apply for a line of credit to meet working capital needs from a financial institution. A line of credit makes money available to you when you need it up to a certain limit. You only have to pay interest on the money you actually withdraw from the line. Business and personal credit cards are other sources of revolving credit that can be used for working capital.
You can apply for short- and long-term business loans from banks and financial institutions to meet working capital needs. The U.S. Small Business Administration operates a number of loan guarantee programs that are designed to help small businesses access the capital they need. These programs are designed for businesses that may have a hard time obtaining credit on their own. If your business is well-established and has good credit, it can apply for a business loan directly from a bank without going through the SBA. Local government agencies and nonprofit organizations that operate economic development programs also offer working capital loans to local businesses that you may be able to access if your business is located in a target area.
Accounts Receivables Financing
Another way to obtain needed working capital is to sell your accounts receivables to a financing company. The financing company buys your outstanding invoices at a discount in exchange for money-in-hand. The financier takes on the responsibility of collecting the money owed to you from your clients, and you can use that upfront money to keep your business afloat.
Special Government Subsidies
If your business operates in certain industries or engages in activities that the federal government is particularly interested in promoting, you may have access to special sources of working capital. For example, the federal government is particularly interested in promoting business exports because exporting directly affects the health of the economy. The SBA operates the Export Working Capital Program to meet this specific need.
You always have the option of selling equity in your company in exchange for an infusion of funds for working capital. You can raise this type of money from anyone with an interest in investing. In exchange for a cash infusion, you give the investor either a percentage of ownership in your business or a number of shares based on your company's value. While the infusion of working capital will help your business continue operations, your ownership will be diluted by the percentage you ceded to the investor.
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