Working Capital Loans

If your business needs funds to address a shortfall or seize an opportunity before it slips away, a working capital loan from Liquidity Solutions could be the answer. Cash flow challenges can arise from many sources, such as seasonal fluctuations, unpaid invoices, necessary repairs, or unexpected bills. Even a full order book can strain your cash flow as you rush to purchase stock and pay staff for overtime. That’s why countless UK businesses rely on working capital loans to bridge the gap, providing the financial support they need to grow or manage expenses effectively.

What is a Working Capital loan?

1. Short-Term Working Capital Loan: A loan designed to cover immediate operational expenses such as payroll, stock, and day-to-day expenses, typically with a repayment period of up to 12 months.

2. Revolving Line of Credit: A flexible credit line where businesses can borrow, repay, and borrow again up to a pre-approved limit, helping them manage ongoing working capital needs.

Advantages of Working Capital Loans

  • Improved Cash Flow: Provides businesses with immediate funds to cover day-to-day expenses, helping maintain smooth operations without disruptions.
  • Flexible Repayment: Options like revolving credit allow businesses to borrow as needed and repay based on their cash flow, offering more control over finances.
  • Quick Access to Funds: Working capital loans are typically easier and faster to obtain, allowing businesses to address urgent financial needs or take advantage of opportunities quickly.
Ready For A Working Capital Loan?
a person looking at finance solutions

Why use a Working Capital loan?

If your cash flow is tied up while waiting for customers to pay or funds to clear, short-term finance could help you bridge the gap. Working capital loans are designed for businesses that have money on the way but are facing a temporary shortfall. For instance, seasonal businesses often experience income concentrated during specific times of the year.

Without sufficient working capital, your business might struggle to:

  • Pay your suppliers
  • Buying heavy equipment
  • Acquire plant machinery
  • Invest in vehicles like cars, vans, and lorries
  • Upgrade computer systems
  • Buy manufacturing or office equipment

You might even face challenges shipping and delivering orders, which could delay getting paid. A working capital loan can help you manage your finances, ensuring you have the funds to maintain operations and smooth out income fluctuations.

a person looking at working capital loans

Business A: Clothing Retail Store

(illustration purposes only)

Business Profile: A fashion retailer with a brick-and-mortar store, specialising in seasonal collections.

Working Capital Loan Need: Business A needs working capital to purchase stock for the upcoming season and maintain cash flow for operational expenses.

Loan Type: Short-Term Working Capital Loan

Loan Details:

  • Loan Amount: £30,000
  • Repayment: £2,582 per month for 12 months
  • Interest Rate: 6%
  • Total Repayment: £30,984 (including interest)

Scenario:

  • Business A secures the loan to purchase additional stock for the upcoming season and to cover payroll and other operational costs.
  • Monthly repayments of £2,582 are made from sales revenue, ensuring the store has enough stock to meet demand.
  • After 12 months, the loan is fully repaid, and the store sees increased revenue due to well-stocked shelves.
a fashion retailer with clothes on display

Business B: Family-Owned Restaurant Business

(illustration purposes only)

Business Profile: A popular family-owned restaurant in a busy area, known for its high-quality food and great customer service.

Working Capital Loan Need: Business B needs a working capital loan to cover fluctuating cash flow during off-peak months and ensure smooth operations.

Loan Type: Revolving Line of Credit

Loan Details:

  • Credit Limit: £20,000
  • Repayment: Interest-only payments on the amount drawn
  • Interest Rate: 8%
  • Monthly Interest Payment (if fully drawn): £133
  • Term: 12 months

Scenario:

  • Business B uses the revolving line of credit to cover payroll and supplier payments during slower months.
  • As customer payments come in, the loan is repaid, and the credit line remains available when needed.
  • The restaurant maintains smooth operations year-round without worrying about cash flow issues during off-peak periods.
a family run burger restaurant

How does a Liquidity business loan work?

1

Apply Online

Start by submitting your application on our website, quick and easy!

2

We Search for the Best Lender

We scan our panel of trusted lenders to find the one that best fits your needs.

3

Connect with Your Lender

We introduce you to the lender, and they’ll take it from there to complete your application. You could get funds in as little as 24 hours.

Options for Increasing Your Working Capital

Overdrafts

If your business already has an overdraft facility, you can access additional funds by dipping into your account’s credit limit. However, setting up a new overdraft can take time, so this option may not be ideal if you need funds immediately. Keep in mind that overdrafts often come with fees and penalties.

Business Credit Lines

A business credit line functions similarly to an overdraft. You agree on a borrowing limit with your lender and can draw as much or as little as needed, paying interest only on the amount borrowed. Credit lines are a flexible option if you’re unsure about the exact amount you require.

Invoice Financing

If you’re waiting for unpaid invoices to clear, invoice financing allows you to borrow against the amounts due. This can be a useful solution when clients delay payments, helping you maintain cash flow in the meantime.

Business Credit Cards

Business credit cards are a convenient way to manage monthly cash flow and access extra funds when needed. However, interest rates on credit cards can be higher than those on other short-term or working capital loans.

Secured and Unsecured Short-Term Loans

Short-term loans are tailored for SMEs needing a lump sum for a specific period. These loans feature fixed repayments and a final due date. Secured loans require collateral, while unsecured loans do not. Keep in mind that some lenders may charge closing fees if you repay the loan early.

Equity Financing

This involves raising funds by selling shares of your business to investors. In return, investors gain partial ownership and a share of future profits. Unlike debt financing, equity financing doesn’t require repayment, which can ease cash flow pressures. However, it does dilute your ownership stake, so it’s essential to evaluate the trade-offs before proceeding.

Business Loans

What is a working Capital Loan

A working capital loan is a short-term financing solution that helps UK businesses manage day-to-day expenses like purchasing stock, paying salaries, and covering bills, ensuring smooth cash flow.

How does a working capital loan work?

When a business in the UK applies for a working capital loan, the lender evaluates its financial health, credit rating, and ability to repay the loan. Based on this assessment, the lender decides the loan amount, interest rate, and repayment terms. After approval, the borrower receives the funds, which are typically repaid in regular installments over a short duration.

How can a working capital loan help my business?

A working capital loan helps bridge cash flow gaps, cover operational expenses, and capitalise on growth opportunities. It enables businesses to acquire stock or raw materials, manage seasonal revenue fluctuations, take advantage of supplier discounts through early payments, and enhance credit scores by ensuring timely repayments.

What are the requirements to qualify for a working capital loan?
Lenders assess factors such as the business’s financial stability, credit rating, time in operation, revenue, profitability, and the owner’s credit history and personal financial health.
How much can I borrow with a working capital loan?

The amount you can borrow with a working capital loan depends on your business’s financial health, revenue, credit rating, and the lender’s assessment. These loans are usually smaller than long-term loans, typically ranging from a few thousand to several hundred thousand pounds.