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What is a Working Capital Loan?

Working capital loans can get your business out of a tight spot in terms of cash flow. They are also common if you need extra capital to help you scale. You need to deploy the proceeds of a working capital loan to pay for the operations of your business rather than to buy long-term assets or make investments.

You will be able to use these specialised corporate loans for several reasons. The most common of these is usually to:

  • Invest in growing the business by hiring new staff, renting larger premises, buying more stock to react to higher than anticipated demand, etc.
  • Manage short-term cashflow 
  • Ride out non-critical dips in revenue, especially in low seasons or in periods when you have lower-than-usual demand
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Working Capital Loan FAQ's

How Working Capital Loans Work

At the most basic level, working capital finance is very straightforward. A lender will let you borrow a sum of money that you can use to pay off day-to-day and operational costs in your business. You will repay the loan – plus interest and fees – over a set period. 

While the financing mechanism is relatively straightforward, these types of deals are complex and challenging to negotiate. Lenders will want to have lots of information about your business and finances to understand how you operate and why you need a loan. How much you are borrowing and how long you are borrowing will also affect how lenders approach a deal and what your loan will cost. Lenders will be exacting, and capital will only be available for certain, very specific uses which will need to be covered in detail with your lender during negotiations.

Secured and Unsecured Working Capital Loans

There are two types of working capital finance. The first is unsecured working capital when a lender will let your business borrow without requiring the company to put forward any collateral. These types of loans will usually require that you go through a thorough vetting process. You will also need to have a track record of financial stability to provide comfort to lenders. The type of business you run, profitability and demand for your products or services will determine if unsecured working capital finance is an option for you. Companies in solid positions that can demonstrate they have sought-after products or services will find it easier to obtain offers for this type of loan. Expect to pay more for unsecured loans than if you put forward collateral, given there is more risk for your lender.

Secured working finance is when your business will agree to provide collateral to your lender. The collateral you put forward will depend on what your business has to offer and what your lender will accept. Secured working finance is cheaper than unsecured working capital loans because your lender has something to fall back on if you default on your loan. That said, every lender in the space will require that your business is in excellent shape before letting you borrow working capital, regardless of whether you opt for a secured or unsecured loan.

Enness will help you understand your options and discuss which the best route will be for your business. Both secured and unsecured loans offer advantages and drawbacks. It’s also worth noting that sometimes the best deal is the more flexible one or the one that keeps you most liberated, rather than being the cheapest. Enness has access to lenders that offer both secured an

Interest Rates, Currency and Costs

What you pay for working capital finance will depend on your lender. 

Lenders will consider every request on a case-by-case basis. Costs will correlate to your company’s broader financial situation, how much you are borrowing, how long you are borrowing for and overall risk. Why you want to borrow will also play a part: if you are looking to ride out a dip in revenue, you may pay more, given there is more risk for your lender. If you are looking to fuel growth by investing in new hires or renting bigger premises, you may find you are offered slightly more competitive rates. Whether you opt for a secured or unsecured loan will also affect what you pay.

Interest rates on working capital loans are usually variable, meaning what you pay may fluctuate in line with the market over the period you are borrowing.

Enness works with global clients and lenders from around the world. No matter where you want to deploy your loan and which currency you need, Enness will source a competitive working capital loan for you.

How Long Are Working Capital Loans?

Working capital loans are a short-term lending solution. They are designed to help you manage cash flow if you experience a short downturn in revenue. Alternatively, these loans also support business growth and help you generate more revenue quickly if there are opportunities for you to do so. 

These loans are usually for just a few months or up to a year. However, depending on your needs, Enness will be able to source high-value working capital finance deals for you that run for longer, if required, and the situation is right. 

Other Considerations

Working capital loans aren’t designed to keep sinking ships afloat. If there is even a risk your business is not on solid ground or that you need a loan to keep you out of financial difficulty, lenders will not let you borrow. Realistically, working capital finance is only ever offered to companies who have a good business case for taking on this type of loan. You will need to present a solid case for why you want this kind of finance, what it will help you achieve and how you plan to pay it back.

Working capital finance is a short-term lending solution. Because this type of finance can be unsecured or come with relatively high risks for lenders, they can be expensive compared to other types of loan. Lenders will want to recoup their costs reasonably quickly, and you will also pay more for the privilege of borrowing than you would in other situations where there’s less risk for lenders.

You’ll also need to have a game plan for how you will deploy your working capital loan. Businesses and entrepreneurs often want to use this type of financing to drive growth or scale a business. If this applies to you, lenders will be happy to support you, but you will need to have a step-by-step strategy for how you plan to hit your targets. Expect to be required to present concrete plans that will be easy for lenders to understand and see sense in. Always working in your best interests, Enness can help you assess your objectives. If your broker thinks lenders will view your plans as too ambitious, Enness' team will help you streamline your ideas to give you the best chance of getting the best finance rates and terms.

Why Work with Enness?

Negotiating this specialist type of finance is an art and navigating the landscape alone will be a lengthy and often lonely process. You will need to present in-depth information to every lender individually. You may well find yourself answering the same questions and sitting through lengthy meetings and calls as you look for the best deal in the marketplace. 

It’s also worth noting that lenders will request all sorts of information from you, and they will have lots of questions just to be able to decide if they want to lend or provide an offer. It’s important to note that lenders aren’t trying to be intrusive or overly familiar. Instead, it is simply a standardised approach to getting the information they need and minimising risk. Enness has extensive experience negotiating significant working capital loans. Your broker will get right to the point with lenders, anticipating the information they need, when they will need it and how to present your case in the best light. Your broker will stick to the facts, sharing only what’s needed and staying on point with the facts of your case. You’ll receive better offers faster and without needing to share all your financial data with multiple players in the market.

Enness has access to all the best working finance capital lenders, meaning you can go straight to the best sources of finance. With deep connections with all the players in the space and a track record to match, Enness’ reputation will open doors for you. Expect offers to come quickly and know that you will have the best possible rates on offer. 


High-Value Working Capital for Businesses

Enness has a track record brokering highly competitive £1m plus working capital loans. Enness works with privately held companies, entrepreneurs, and high-net-worth individuals to secure significant working capital loans for their business or corporate ventures. 

Most mainstream working capital lenders offer finance for relatively small amounts – sometimes just a few thousand pounds. If you are looking for a seven or eight-figure working capital loan, you will need to approach financing differently. You will want a flexible package that meets your business' needs rather than a one-size-fits-all package deal that middle-market lenders usually offer. 

You may also find that lenders will not want to offer high-value working capital loans, and they prefer to spread risk by providing smaller loans to more businesses. It’s also possible that they will simply not have access to the finance you need: many operate with relatively small pools of capital that they lend for short periods.

It’s also worth noting that the larger the deal, the more you may be able to negotiate in advantageous rates and terms. That said, negotiations require finesse and a shrewd approach. At this level, negotiations will start with how you present your case to lenders. You will need to lay out the facts clearly and with confidence. Unlocking the best finance is a question of showcasing the best elements of your situation and the opportunities this kind of financing offers your business. Understanding how to put forward your financials, plans and where your lenders will want more explanation and justification is crucial. Enness can approach specialist lenders and will handle negotiations on your behalf, ensuring you receive the best offers, terms and rates, no matter how much you want to borrow.

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Contact Enness for Working Capital Loans

Enness will save you valuable time and make the process of sourcing and negotiating working capital finance efficient. No matter how much you want to borrow, Enness will secure the very best working capital loan for you.