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What You Should Know About Net Working Capital

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What is Net Working Capital?

Net working capital is a financial metric that measures a company’s liquidity and efficiency. It is calculated as the difference between a company’s current assets (such as cash, accounts receivable, and inventory) and its current liabilities (such as accounts payable, short-term debt, and taxes payable). A positive net working capital indicates that a company has enough liquid assets to cover its short-term obligations, while a negative net working capital indicates that a company may have difficulty meeting its short-term obligations.

How To Interpret Net Working Capital?

The net working capital is a measure of a company’s liquidity and efficiency. A positive NW means that a company has more current assets than current liabilities, indicating that it has enough liquid assets to cover its short-term obligations. A negative NW means that a company has more current liabilities than current assets, indicating that it may have difficulty meeting its short-term obligations.

A high NW indicates that the company is in a strong financial position and has a good ability to meet its short-term obligations. A low NW, on the other hand, indicates that the company may be struggling to manage its short-term debt and may be at risk of defaulting on its obligations.

An increasing NW over time can indicate that a company is managing its liquidity well and is growing its business. A decreasing NW over time can indicate that a company is struggling to manage its liquidity and may be at risk of financial distress.

It is important to note that a high or low NW alone is not the only indicator of a company’s financial health, and it should be considered in conjunction with other financial metrics such as cash flow, profitability and debt levels.

How To Calculate The Net Working Capital for Your Business?

Net working capital is calculated by subtracting a company’s current liabilities from its current assets. The formula is:

Net Working Capital = Current Assets – Current Liabilities

Current assets include cash, accounts receivable, inventory, and other assets that are expected to be converted into cash within one year. Current liabilities include accounts payable, short-term debt, taxes payable, and other obligations that are expected to be paid within one year.

For example, if a company has $500,000 in current assets and $300,000 in current liabilities, its net working capital would be $200,000 (500,000 – 300,000). This indicates that the company has $200,000 in liquid assets to cover its short-term obligations.

What Are The General Requirements for Getting a Working Capital Loan?

Working capital loans are typically used by businesses to fund their day-to-day operations and cover short-term expenses. The general requirements for a working capital loan may vary depending on the lender, but some common requirements include:

  1. Good credit: Most lenders will require a business to have a good credit score in order to qualify for a working capital loan. This is because working capital loans are typically unsecured, which means they are not backed by collateral.
  2. Financial statements: Businesses will typically need to provide financial statements, such as balance sheets and income statements, to demonstrate their ability to repay the loan.
  3. Business Plan: lenders will want to see a detailed business plan outlining how the loan will be used and how it will help the business grow.
  4. Time in business: lenders will typically want to see that the business has been in operation for a certain period of time, typically 2-3 years.
  5. Revenue: lenders will also want to see that the business has a consistent revenue stream, which will be used to repay the loan.
  6. Collateral: Some lenders may require collateral to secure the loan, such as equipment or real estate.

It’s worth noting that some alternative lenders may have different requirements and may be more flexible with the above requirements.

What Are Some Problems with Net Working Capital

Net working capital is a useful metric for measuring a company’s liquidity and efficiency, but it does have some limitations and potential problems:

Short-term focus: NW only measures a company’s ability to meet its short-term obligations, and it does not provide information about the company’s long-term financial health.

Seasonality: A company’s NW may be affected by seasonal fluctuations in its sales and expenses, which can make it difficult to compare the metric across different periods of time.

Inventory: A company’s inventory can greatly affect its later. A large inventory may increase current assets, but it may also tie up cash and may not be easily converted to cash, making it less useful in paying off short-term debt.

One-dimensional: NW only looks at current assets and current liabilities, and it does not take into account other important factors such as a company’s long-term debt or equity.

Different accounting standards: Because accounting standards vary by country, it may be difficult to compare later of companies from different countries.

It is important to remember that NW is just one metric among many that should be considered when evaluating a company’s financial health. It should be used in conjunction with other financial metrics such as cash flow, profitability, and debt levels to get a more complete picture of a company’s financial position.

How to Effectively Reduce Net Working Capital

To reduce net working capital, companies can use various methods such as increasing their current liabilities by taking out short-term loans, delaying payments to suppliers, or by implementing stricter credit policies for collecting accounts receivable. Another way would be to decrease current assets by reducing inventory levels, or by selling and leasing back fixed assets.

However, it’s important to note that reducing net working capital too much can be a problem, as it may indicate a lack of liquidity and make it difficult for a company to meet its short-term obligations. Therefore, it’s essential to find a balance between reducing net working capital and maintaining sufficient liquidity to meet the company’s short-term needs.

If your company is in need of a quick working capital loan, the Quick Capital Funding team is always available to answer all your questions and get you the loan you’re looking for.  Call us today or complete our easy online application.

A Guide to Medical Practice Loans

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For many medical practices, financing new equipment and facilities is nearly impossible.

Private medical practices have a difficult time securing loans through traditional banks because of their lack of collateral. But, that doesn’t mean you can’t or even shouldn’t apply for loans. There are alternative loan options designed specifically for medical practices that will help you fund your medical facility.

Hopefully this article serves as your introduction to them.

What Is a Medical Practice Loan?

A medical practice loan is a type of loan designed for the growing needs of private practices and medical offices.

These loans can be used for anything your business requires, from purchasing new equipment to building new facilities to maintaining cash flow. Medical practice loans are an alternative financing option designed specifically for private medical practices.

They are a practical alternative to traditional bank loans. Traditionally, it is helpful to have 3 years of tax returns, the names and addresses of all your vendors and suppliers, and three years of bank statements to apply for business funding.

How Can You Use a Medical Practice Loan?

Pay for expansion of your practice: Expanding your practice may be a great move for your business, but expansions can take funding.

Pay for new equipment: Medical practice loans are perfect for investing in new equipment. They help you keep your cash flow healthy, protect your profit margin, and are easily tax deductible.

Enhance patient experience: Upgrading your medical facility can go a long way toward improving the patient care experience.

Are There Restrictions on Medical Practice Loans?

Medical practice loans can be structured in a traditional way with traditional loan terms like 15, 20, and 30 years. Most loans will let you borrow up to $2 million. Usually, you’ll have a fixed rate and your repayments can be spread out over 5 to 15 years.

If you know in advance how much you need to borrow and your repayment terms, securing a loan will be easy. But you should know that we do have a few restrictions. We’ve worked especially hard to find flexible lending partners that offer medical practice loans, but we do have specific requirements. We ask that borrowers meet the following requirements: Be a physician, physician assistant, nurse midwife, or nurse practitioner with a valid license to practice medicine.

How Do Medical Practice Loans Work?

The exact terms of your medical practice loan will be based on your requirements and the lender you choose to work with.

You apply online: That’s the easy part. Then you get qualified and pre-approved. That’s the hard part. Medical loans are tough to qualify for and have access to. But if you do qualify, that doesn’t mean you should just take the first offer you receive.

Do business banking: You are most likely going to want to borrow the money and build your business at the same time. This may mean that you’ll be doing a lot of business with the lender you choose. That may mean that you’ll have to open an account with the lender to get a loan.

Make the purchase: When you buy brand new equipment, you’re taking advantage of tax breaks, tax credits, and tax deductions. You can still get financing for that equipment purchase through a loan, but you’ll have to make a down payment and pay back the loan

Who Uses Medical Practice Loans?

Doctors and other medical professionals use these loans for a variety of purposes.

They buy new lab equipment, they build new facilities, they refinance debt, and they even use them for investing in other companies and medical products. Doctors can also buy medical equipment like scales, meters, x-ray machines, and beds through a loan.

The best way to think of these loans is as an investment. They are an investment that returns handsomely over time. Medical practice loans are an especially smart investment in the current economy. With less than 3% of Americans with private insurance, there is a huge business opportunity for doctors who are willing to invest themselves into their medical practices.

Who Are the Medical Practice Lenders?

Medical practice lenders are lending institutions that specialize in providing financing for medical practices. Medical practice financing is not a traditional loan product, it is usually a more specialized financing product that is accompanied with greater borrower risk than a traditional loan from a lender. The medical practice lenders are compensated for this risk by charging a higher interest rate for medical practice loans than would be charged on a typical loan. They are also more stringent on the underwriting standards that must be met before a loan is approved.

Who Gives Medical Practice Loans?

Medical practice loans are available with medical practice loan programs through the Small Business Administration (SBA) and alternative lenders. Alternative lenders are usually found through online medical loan directories. The SBA has a healthcare loan program that is specifically for medical practices. You can also find traditional banking institutions that have specialty loans specifically designed for medical offices through your local bank.

No matter how you find your practice loans, be sure that they are unsecured, which means no collateral is needed to secure them.

At Quick Capital Funding, we specialize in finding loans for all situations. Our team has cultivated relationships with a bank lender network and investors who specialize in medical practice loans. We’ll take the time to get to know you and what you need. If you would like to learn more about how we can help you grow your business, please call 1-833-750-0485 or send an email to info@quick-capitalfunding.com.

A Guide to General Contractor Financing

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Construction projects are expensive, and it’s hard to turn a profit if you are just starting out. Construction loans are good options for contractors who need cash to complete a job or expand their business. One of the benefits of construction loans is the fact that the interest rates may be tax deductible. Since borrowed money is treated as ordinary income, the interest you pay on the loan is deductible on your taxes and potentially lowers your taxable income. Applying for a construction loan can also help you build your credit score, since most lenders require you to provide proof of income to qualify. When you are ready to apply for your loan, network with other business owners in the construction industry to get a recommendation.

Here are some things to consider when looking for general contractor financing.

What is contractor financing?

Contractor financing is a loan that a contractor takes out to fund their business. It is typically unsecured and uncollateralized (cannot be pledged as a barrier to repayment). The lender in this case is usually another contractor or construction company, rather than a bank, so rates are generally lower than traditional bank loans.

This loan can be used to pay for expenses related to construction, whether it’s materials, labor, equipment rental, or general operating expenses.

Home improvement financing

Home improvement loans can be used for a variety of projects, including renovations and repairs. They can also be used to fund the purchase of new tools and equipment for your business.

Home improvement loans are unsecured, meaning they don’t require any collateral (like your house). As such, they are generally more expensive than secured loans. The good thing about home improvement loans is that they tend to have lower interest rates than traditional business loans. They also have more flexible terms than business loans, often allowing larger loan amounts.

Trade credit

Trade credit is similar to credit card financing in that you don’t have to pay interest or repay the principal until some time after the work has been completed. However, most contractors and construction companies prefer trade credit because it doesn’t impact their cash flow as severely as a loan would.

Trade credit is a line of credit you can tap whenever you need cash and pay back later. Unlike a business loan, you don’t have to come up with a deposit upfront to qualify for a trade credit account.

Line of credit

Line of credit (or trade credit) is the best way to get financing without a long-term commitment. Ideally, you want to shop around and get the line of credit with the lowest interest rate, the most flexible terms, and the best repayment schedule to satisfy your business needs.

Having a home is your very own personal space where you can be yourself and relax. It is where all of your memories are made, but a home can also be a source of stress and can also add unnecessary costs to your budget.

Project cost financing

Is a type of contractor financing that is used to cover the cost of projects before they are completed. It may start off as a simple loan, but it can become a long-term line of credit if demand is higher than cash flow.

A project cost line of credit might be structured as a secured loan with collateral, like a home, or as an unsecured line of credit. Some contractors use equity in their home for project cost financing to avoid putting all of their borrowing power into their business.

Business credit cards

Business credit cards are a quick and easy way to get financing for your construction company. Some cards offer 0% APR for purchases and balance transfers for up to 18 months, while others offer rewards like cash back or points that you can redeem towards free travel.

Business credit cards come with high interest rates and fees, so it’s important to read the fine print and compare offers from several different providers to find one that works for you.

Business banking loans are generally reserved for established owners and business owners seeking to expand their business. As a result, small-business loans have stricter criteria than personal banking loans. To qualify for a business banking loan, you will need good credit, solid business and personal financial statements, and proof of your work experience in the industry. Business banking loans are usually smaller than home improvement loans and project cost loans because they don’t require as much collateral.

Invoice factoring

Invoice factoring is an alternative to getting a loan to pay for construction expenses or expand your business. An invoice factoring company purchases your invoices at a discount, which frees up cash for you to send to your customers. Invoice factoring is more expensive than traditional trade credit, but it often has a faster turnaround when you need cash right away. Some factoring companies even offer up to 90% of the value of your invoices.

Equipment financing

Equipment financing is a great way to get cash if you need to invest in new equipment for your business. Equipment financing differs from other types of business loans in that it doesn’t require a down payment or collateral (like your home or equipment) to qualify. In fact, there is no lengthy application process for equipment financing options. You simply need to complete a short online form, and a dealer representative will follow up with a phone call to discuss your loan options.

The risk & cost of contractor financing

Construction projects can fail for a number of reasons – weather affects, problems with subcontractors, etc. Whatever the problem, you must pay your creditors. If you decide that a project is unprofitable and no longer worth completing, you will have to refund client deposits (or pay them back) and cancel your contracts with subcontractors. You may also have to repay the general contractor loan in full, so doing proper due diligence is crucial.

How to qualify for better financing

There are several ways you can reduce your risk and improve the lender’s perception of your creditworthiness. In practice, this means that you pay less to borrow and get better interest rates.

  1. Be organized: This point applies both to your finances and your paperwork. Every dollar counts on construction projects and it is crucial to save money wherever possible. To save money, send invoices promptly and follow up on late payments.
  2. Build relationships: Talk to other business owners in your trade. Ask them for recommendations if you need a lender. Talk about your credit history and ask about the interest rate on their current loans. You may be able to get better rates on better terms if you are connected to someone who has good credit with your current lender.
  3. Do your homework: Before taking out a loan, research the lenders in your area and talk to friends in your industry. Make sure you know what kind of financing you need and what the terms of the loan will be. If you do this properly, you can save money and reduce the risk associated with financing.
  4. Use credit wisely: Having enough cash on hand is important when dealing with construction lenders and projects. However, try to maintain a healthy mix of cash and credit in your business. Having sufficient cash flow ensures that you have a cushion if a project runs into problems or you need to finance another project quickly.

How to Finance Your New Restaurant

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Opening a new restaurant is a dream for many entrepreneurs. Whether you have restaurant experience or not, it is possible to start a successful restaurant as long as you are smart about it. Be honest with yourself about how much money you will need to invest to create a successful restaurant. You will need to invest some money to even get started, and you may need more if things are going well and you want to expand. It is important to know how much you are willing to invest and to give yourself a timeline for reaching the goals you have for your restaurant business.

Before you start looking for financing, you should put together a detailed business plan and forecast. Your business plan should include:

  1. A restaurant concept that is profitable and sustainable
  2. A detailed menu and list of ingredients
  3. A location that can accommodate your concept
  4. A detailed financial forecast that shows your projected income and expenses

Once you have completed your business plan, it’s time to look for financing so that you can open your doors and bring your dream to life.

Here are some alternatives you can look to for financing your restaurant:

Investors

A key component of opening your first restaurant is finding investors. Although you must approach investors, you must be prepared to show them that you are ready to open a successful business. Do not be afraid to ask friends and family members to invest in your business. It is a good idea to have a certified business plan that describes your restaurant concept and market analysis.

Angel investors may be an option. These are wealthy investors who invest in early-stage businesses that are seeking funding. These investors look for small businesses that need seed money to grow, so be realistic about the amount of money you are asking for. Having a strong business plan will also help sway angel investors.

Loans from Friends and Family

Many first-time restaurant owners often fail to consider loans from friends and family members until they are desperate for money. While loans from friends and family are an attractive option, they can also be emotionally draining. Before taking out a loan from a friend or family member, make sure you have a solid contract with that person so there is no awkwardness in the future.

A loan from your friends and family can be risky, so make sure you have enough collateral to secure the loan. Your loan agreement should include payback terms, interest rates, and collateral requirements.

SBA Loans

Small Business Administration (SBA) loans are aimed at helping people who otherwise wouldn’t be able to obtain financing to start a business. SBA loans can help you secure financing for up to $5 million. While SBA loans can be a good option for large restaurants, these loans can be difficult to obtain if your restaurant’s future is uncertain. It’s important to remember that after you receive your loan, you will have to pay back the full amount with interest. In addition, an SBA loan is a serious commitment because it requires you to put up collateral and guarantees the loan in case you are unable to pay back the loan.

Bank Loans

Many banks offer loans for a variety of purposes to small business owners. Like most loans, credit card debt, home equity loans and unsecured loans all come with a cost in terms of interest rates and other fees. Make sure you understand all of the fees associated with your loan before signing on the dotted line.

In addition, keep in mind that most banks will not lend money to restaurants that are brand new. Banks are more likely to loan money to restaurant buyers who have franchises or existing businesses that are well-established.

Credit Union Loans

Credit unions are a great alternative to banks and typically have lower interest. If you are seeking funding for a new business, an angel investor might be one of your primary sources of funding. An entrepreneur might dream of using a loan from a private investor to fund their ambitious venture. There are many ways to get personal loans from friends & family, but it can take patience and diligence. costs than banks and other financial institutions. Like banks, however, you will usually have to put up collateral to obtain financing from a credit union. Credit unions also require business owners to be members to ensure a local connection and to support the credit union’s mission.

Crowdfunding

Crowdfunding can be a great alternative to traditional bank loans. Crowdfunding enables restaurant owners and other entrepreneurs to spread their message through social media and raise money for their project through donations. Many people use crowdfunding to raise money for charitable causes or for creative projects. Depending on your fundraising efforts, you may be able to raise thousands of dollars for your project.

Be sure to check out how to finance your first restaurant before you start looking for loans. By evaluating your prospects and putting together a detailed business plan, you will be able to obtain financing that is perfect for your restaurant. At Quick Capital Funding we can assist with your funding needs. Make sure to contact us at info@quick-capitalfunding.com or give us a call 1-833-750-0485 for a free consultation and more information.