04
June
2019

3 Tips to Maximize Your Working Capital Business Loan

Like thousands of businesses across the country – particularly smaller and mid-sized firms – you’ve decided to apply for a working capital business loan, either from us here at Mulligan Funding, or from another reputable and credible company.

However, before you submit your application, we recommend that you keep these 3 tips in mind to maximize your working capital loan, and essentially get the most value for the least cost (and minimal stress as well!).

Don’t borrow more than you need.

If you’ve been turned down for a conventional bank loan or perhaps have less-than-perfect credit, you may feel compelled to borrow as much as possible and essentially “strike while the iron is hot”. However, in our experience working with numerous business owners across the country, this can be a highly counterproductive move – which is why we counsel our clients from taking such a position.

That’s because borrowing more than you actually need creates two problems. The first is that your repayment amount will be higher than it needs to be. This may not be a problem today, but it could become a problem a few months from now if your cash flow situation changes.

The second is that unless you have a profitable use for your working capital business loan (e.g. purchase equipment, hire staff, add location, etc.), the excess funds will be “dead money” sitting in your account. Perhaps a decade or so ago this wasn’t such a big deal. But today, business savings accounts pay virtually no interest – and what they do offer is below the rate of inflation. So basically, you’ll be losing money by having it sit in your account.

Ensure that repayment is automatic.

Running a business isn’t just hard work: it’s also long work, in the sense that the hours are long, and there’s no such thing as a lull. The moment you find yourself with a few free moments of blissful “peace and quiet”, something new emerges or comes rushing down the pipeline.

The reason we bring this up, is because it’s extremely easy – and in some ultra-hectic business environments, arguably a foregone conclusion – that loan payments will be late or forgotten. This is simply because there always things during the day that get overlooked – such as returning a phone call, calling a supplier, or (yes, you guessed it) taking care of the working capital business loan payment.

The way to avoid this from happening is extremely simple, and requires no warning system: have your loan automatically paid back each day, directly from your account. This way, you’ll never miss a payment; in fact, you don’t even have to think about payment. That’s a load off your mind, because while it’s OK to occasionally forget to return an email or call a supplier, it’s really not a good idea to miss a loan repayment.

Ensure that you can repay your loan early.

Even if you borrow an amount that fits rather than exceeds your anticipated needs (per point #1 above), you may find yourself in a position to repay your loan earlier than scheduled. For example, you may have negotiated a deep discount on inventory thanks to your increased purchasing power, or instead of hiring 4 new team members, you found that 3 would do just as well for now.

Regardless of the reason(s), ensure that you can repay your working capital business loan early if you are in a position to do so, and it if it’s in your best interest. The firm that provided your loan should have NO problem with your decision. Rather, they should congratulate you on your solid financial footing, and cheerfully look forward to working with you again.

The Bottom Line

Applying for a working capital business loan can be the smartest financial decision you make all year. However, to maximize your loan and get the most for the least, we urge you to keep the above in mind.

Call Mulligan Funding at 855-326-3564 to discuss your financing options today!