How to Satisfy Working Capital Loan Requirements for Your Business
June 16, 2022
Not every business has a clean, consistent business cycle. Perhaps your business is cyclical in nature or you pursue large projects that require significant upfront expenditures to get started. The problem is that it might take a while to collect the revenue that you are owed for providing those goods or services.
Or, your company may have significant downtime during the year where you need support covering payroll, insurance, and other day-to-day business expenses while you wait for seasonal revenue opportunities.
Regardless of what causes the uneven business cycle for your company, you can utilize a working capital loan to smooth out business operations while you wait to receive revenue.
Plus, you can also roll an inventory loan into a working capital loan to cover a bulk purchase of inventory that is necessary to support the work to be done during seasonal spikes or larger jobs.
At Texas Gulf Bank, we offer flexible options on working capital loans to our business customers along the Texas Gulf Coast. Find out more about when it’s a good idea to apply for a working capital loan, how this type of loan works, and how to meet the working capital loan requirements to receive access to funding that will support your operational needs.
Are You A Good Fit for a Working Capital Loan?
Before applying for a working capital loan, it’s important to ensure that your business is a good fit for this type of loan. Consider these characteristics that we look for from applicants.
1. Need to bridge operating costs. Mostly, we look for businesses that experience timing delays in the collection of accounts receivable and expense outlays. If you have a regular business cycle without much fluctuation, then you may want to consider one of our other business loan options to obtain financing for other business situations.
2. Can pledge collateral. We also look for companies that have enough working capital assets and capital reserves that can serve as collateral to secure a working capital loan. Typically, borrowings under a working capital line are secured by assets such as Account Receivable, Inventory, and/or a general pledge of all company assets. Do you have enough assets in reserve that you can pledge for this type of loan?
3. Has a strong financial history. We look for an adequate history of operating profitably to prove that your company is financially stable to withstand a seasonal or irregular business cycle. We also look for good credit indicators for both the company and the individual guarantor(s) of the loan to ensure that you are financially responsible.
Our Working Capital Loan Requirements
When you are ready to apply for a working capital loan to support your business, we will require the following information as part of your application including but not limited to:
- Completed application form for a working capital loan.
- Last two years of balance sheet and income statements for the business.
- A current Accounts Receivable (A/R) aging report.
- A listing of current inventory levels (especially if looking to roll an inventory loan into a working capital loan).
- Other material collateral documentation may be required to support the loan.
- The most recent monthly or quarterly interim statements may also be required.
- For the individual guarantors of the loan: we will require copies of the two most recent federal tax returns and updated personal financial statements.
Once we receive the completed application form and the relevant business and personal financial information that is needed to underwrite and close the loan, we will review your loan package in a timely manner. The typical length of our review is less than two weeks.
One of the advantages of working with Texas Gulf Bank is that we offer an expedited loan review and approval process. Because we are a local, independently-owned bank, we make our lending decisions in-house without needing to spend valuable time seeking outside approval.
We will remain in contact with you throughout the decision-making process and follow up with any questions we may have about the nature of your business, current inventory levels, and/or financial history.
What You Can Expect If Approved for a Working Capital Loan
If your company is approved for a working capital loan, then we will review the loan terms with you to ensure that everything fits your business needs. Certain covenants may be required depending on the complexity of the loan.
Generally, we will lend on a percentage of eligible accounts receivable and inventory to establish a borrowing base for the working capital loan. In other cases, collateral may be incorporated into the loan to account for the timing of your cash cycle when you expect to collect on accounts receivable.
Once a working capital loan is established, this type of loan is generally extended on an annual basis and reviewed each year for renewal. This allows us to continue supporting your business need, especially if you win a new type of project that will place even more stress on your operating cycle or if there is a shift in the seasonal nature of your industry.
Get Started Today on a Working Capital Loan
As a relationship-based bank, we focus on the individual needs of each customer that we serve. The working capital loan that we offer you will be unique to your particular business, history, and length of your cash cycle. We will also look for opportunities to roll an inventory loan into a working capital loan to cover specific inventory purchases that will help your business.
If you believe that your company meets the working capital loan requirements, then talk to a Texas Gulf Bank loan officer today. We’ll help you further explore the opportunity to obtain a working capital loan that will help your business navigate an uneven business cycle.
During our conversation, we will provide you with an upfront assessment of whether your business needs appear to fit this type of loan. Then, we can get started on the loan application process. Use our contact form below to get started. We look forward to supporting your business!
All Loans Subject to Credit Approval