{"id":2385,"date":"2020-04-30T08:00:03","date_gmt":"2020-04-30T13:00:03","guid":{"rendered":"https:\/\/lqdfinance.com\/?post_type=insights&p=2385"},"modified":"2020-12-03T13:36:44","modified_gmt":"2020-12-03T19:36:44","slug":"working-capital-loan-vs-purchase-order-financing-which-business-loan-solution-to-choose","status":"publish","type":"insights","link":"https:\/\/staging.lqd.cliquedomains.com\/insights\/working-capital-loan-vs-purchase-order-financing-which-business-loan-solution-to-choose\/","title":{"rendered":"Working Capital Loan vs. Purchase Order Financing: Which Business Loan Solution to Choose"},"content":{"rendered":"

When it comes to sustaining cash flow, many businesses-especially small businesses- find themselves grasping at straws.<\/span><\/p>\n

Picture this scene: You’ve just launched your small business. It’s doing quite well. Demand is skyrocketing, which in turn provides an opportunity for you to generate more income. On the flip side, you still need to free up working capital to purchase raw materials, hire a skilled workforce, and so on. At some point, it feels like you’re stuck in the proverbial hard place and a rock.<\/span><\/p>\n

So, how do you exit this dilemma? Whichever the situation, it is wise to explore <\/span>business funding solutions<\/span><\/a> that can facilitate increased efficiency, increased returns, and better performance. Simply look at the bigger picture. While it is possible to choose a loan option at first glance, flexible financing is the way to go.<\/span><\/p>\n

Working Capital Loan and Purchase Order financing can both give your business the kind of capital flexibility it needs. However, they are two different financing options.<\/span><\/p>\n

LQD Business Finance experts will help break down both the similarities and differences to help you make an informed financing decision.<\/span><\/p>\n

Working Capital Loan<\/h2>\n

A working capital loan is a type of loan taken to fund a company’s daily operations. It is a flexible loan option for firms that need urgent cash to pay off recurring expenses. Small or medium-sized businesses settle things like debt payments, rents, or equipment financing using working capital loans. It’s the cash you need to keep your business afloat while you await new customers.<\/span><\/p>\n

How it works<\/h3>\n

Working capital loans are a form of unsecured loans. They help you raise your working capital without having to risk personal or business assets.<\/span><\/p>\n

Also, this loan is viable for businesses that experience cyclical sales or have high seasonality. It helps to cushion your company in periods of reduced business activity. For instance, manufacturers can secure working capital loans to cover operating expenses during a recession (the quiet period of the fourth quarter). Then, they repay the debt upon the turn of the busy season when the company no longer requires financing.<\/span><\/p>\n

Business finance offered by working capital loans ranges between $1,000 and $50,000. Typically, the repayment period can be up to 36 months. For business owners who may like a considerable debt, they may have to put personal assets as leverage. The size of the loan depends on the firm’s creditworthiness and profile.<\/span><\/p>\n

Purchase Order Financing<\/h2>\n

PO financing is an advance from a lender (financing institution) that reimburses your supplier for goods you are distributing or reselling to a consumer. In short, it is a loan type that helps small businesses to manage specific product orders.<\/span><\/p>\n

A late or unfilled order can impact your business’ growth and reputation. Therefore, you need a funding alternative that can bridge this gap. Purchase order financing<\/a> helps you to accumulate the right amount of working capital you require to deliver a product order and deliver it on time.<\/span><\/p>\n

How it works<\/h3>\n

As a form of traditional factoring, purchase order financing provides a quick, short-term cash injection to a company when:<\/span><\/p>\n