How to Get a Working Capital Loan From Our Local Bank

July 19, 2022

If you’re looking for information about how to get a working capital loan from a bank, you’ve come to the right place. At Texas Gulf Bank, we help small and medium-sized businesses on the Texas Gulf Coast access the funding they need to support business operations.

Whether you are waiting to collect an increase in revenue, need to cover a major expense, or have another need to support managing your company’s cash cycle or growth, we can provide you with a solution to fit your particular situation.

Let’s take a closer look at what we require from qualified borrowers to obtain a working capital loan.

What Do You Need to Get a Working Capital Loan From a Bank?

Our goal is to ensure that your business is a good fit for a working capital loan. But, for many businesses, this type of loan product is essential to support continuous operations during irregular business cycles or growth.

In order to start down the path of obtaining a working capital loan, you will need the following:

1. A strong financial history. We understand that it can be difficult to maintain profitability if your company spends most of the year managing accounts receivable, incurring large cost outlays for projects, and chasing down payments for goods/services.

However, it’s important to show our bank that you are still able to operate profitably despite challenges with the cash cycle. This tells us that you have a disciplined approach to how you run your business, that you are resourceful to be able to turn a profit, and that you are capable of repaying a loan if approved by our bank.

2. Sufficient collateral coverage and capital reserves. Another necessity is having enough assets on hand that can serve as collateral to support a loan. The strength of your assets proves that your business has longevity, indicates that you can cover the loan repayment terms, and reduces our risk as the lender. It becomes a win-win situation for both parties.

Our loan officers will review the types of assets that you present to our bank to determine the quality of the assets, their liquidity, and their eligibility to be recognized as collateral. For example, we will want to review the amount in Accounts Receivable (A/R) and an aging schedule thereof to determine how much you’re waiting to collect and when you expect to receive payment from your customers.

Additionally, this assessment helps us at the end of the loan application process. If your business is approved for a loan, we will typically lend a percentage of funds based on all eligible assets. Our calculation will help us establish a borrowing base (or loan amount) for the working capital loan.

3. Good credit for the business and individuals. We also want to review the credit history of both the business and the individual guarantors (or owner(s) of the business with 20% or more ownership) who will back the loan. We expect that the owner(s) of the business will personally guarantee the working capital loan, which is why we will review the credit history of those individuals, in addition to that of the business.

Among other factors, our loan officers will look for the following credit indicators (from both the business and the individual):

Consistent ability to repay debts.
The dollar amount of outstanding debts.
The number of revolving credit accounts.
History of outstanding liens.
Other credit factors related to your situation.

Our lending approach boils down to the 5 C’s of credit: capacity, capital, collateral, conditions, and character. We will take all of these credit factors into consideration when analyzing a loan for qualification.

How Does the Application Process Work for a Working Capital Loan?

We have covered the prerequisites to be considered for a working capital loan. Now, let’s review the application process.

1. Submit an application for a working capital loan. If after reading and understanding the points in the paragraph above, you feel your business meets or exceeds the qualifications described therein, we recommend that you get started by completing our loan application. You can access the loan application via our website, by visiting one of our local banking centers, or by contacting us directly over the phone.

We ask that you provide complete and thorough answers so that we can expedite the review process. Incomplete or misleading information will extend the loan application process and could lead to disqualification from consideration.

2. Provide us with specific documentation about the business. We will ask for a specific set of business documents and financial reports to help us assess your financial position. These documents are critical to help us understand the nature of your company’s cash cycle, your need for a working capital loan, and the stability of your business.

The basic document list includes the following items. (Additional documentation may be required.)

Year-end balance sheet from the past three years of business operations.
Year-end income statements from the past three years.
Most recent, year-to-date balance sheet and income statement.
Current Accounts Receivable (A/R) statement and aging schedule.
Current Accounts Payable (A/P) statement.
Listing of inventory in your company.
Material collateral documentation to prove sufficient collateral coverage.
Company formation documentation and tax ID information.
List of owners and their percentage of ownership.
History/bio of the company.

3. Provide us with documentation about the individual owners providing a guarantee. In addition to providing us with documentation about the business, we will also ask that each individual guarantor produce information about their personal financial history.

Last three years of filed federal tax returns from each individual.
A personal financial statement from each guarantor.
Resume or bio on each owner and that of the key employees of the company.

Once we receive the required documentation related to the business and the individuals, we will complete our review. Because we are an independently owned and operated local bank, we can expedite the review process. You can help, too, by providing us with complete and thorough information. The better the input, the faster we can validate the information and complete the application process.

What Happens if Approved for a Working Capital Loan?

Once our lenders complete their review, you will be informed of our lending decision. We know your time is valuable, so we will work hard to provide you with an upfront response.

Then, if your company is approved for a working capital loan, we will follow up with you to present the loan terms to you. Each working capital loan that we offer to our customers is unique. You will have the opportunity to review the approved loan, discuss the terms with our loan officers, and ensure that everything is suitable for your needs.

Once the loan closes and we set up your account, we will provide you with funding according to the loan terms. You’ll then be able to access the funds to support your desired business purpose.

Down the line, our bank will review the working capital loan to ensure that the loan product is continuing to meet your needs. We typically perform this review on an annual basis to determine whether to extend the loan or to present you with an alternative business loan product.

Get Started Today on a Working Capital Loan

If you’re ready to stabilize your business cash flow and cover critical expenses, consider applying for a working capital loan today.

At Texas Gulf Bank, we look to establish long-term relationships with local businesses, not just help with a transaction. We want to understand your business, history, challenges, and the length of the cash cycle. This way, we can stay involved in your business and continue to meet your changing needs for years to come.

To get started on the loan application process, complete our contact form below. You can also reach out to us directly to further discuss how to get a working capital loan from our bank.

All Loans Subject to Credit Approval