If you are a subcontractor looking for working capital loans, you must familiarize yourself with the concept, and what types of loans are available for different purposes. So without further ado, let us find out what working capital loans for subcontractors are and how an app can help you gain access.
Working Capital for Subcontractors
Working capital for subcontractors is different between your current liabilities and current assets. Your current assets include cash, lines of credit, accounts receivables, credit cards, and any other assets that you can convert into cash. On the other hand, liabilities are your current liabilities, accounts payable, material costs, accrued labor expenses, etc.
The difference in your assets and liabilities helps you determine how much cash you have in hand to run your business for the next couple of months. As a subcontractor, understanding your entire financial situation is critical in ensuring that your business runs smoothly and continues to grow.
In case you do not have enough cash, it may stop you from accepting large projects. This is because you will not be able to afford the labor, equipment, and materials required for the new project. Furthermore, you may struggle to get a bank loan because traditional lenders will gauge your working metric to determine your ability to repay the loan amount.
However, that does not mean that you must have excessive working capital. This is not good either because it shows that you are failing to grab new projects and opportunities.
Why Working Capital Loans?
Most small businesses, such as subcontractors, find it hard to secure a loan from a traditional bank. Furthermore, the process comes with a long list of requirements, and it takes too long to get approval. Typically, even if a bank does agree to approve a working capital loan, it will take you at least one month to get access to the money.
This is not very ideal because most subcontracting businesses depend on securing immediate project opportunities, and for that, they need immediate access to cash. Therefore, you have to look for alternative working capital loans for subcontractors. These loans usually come with more lenient requirements, and you can get immediate access to cash within a matter of days.
Working Capital Loans for Subcontractors
If you wish to increase your working capital and improve your position in the market, here are the types of working capital loans for subcontractors that you can look into.
Lines of Credit Loans
Lines of credit cards are like credit cards that offer you a constant and instant stream of cash that you can withdraw as and when you need. However, just like a credit card, a lender will consider your credit history, business's financial health, and other factors to determine your credit limit.
Once you receive the approval, you will be able to use a debit/credit card to withdraw the cash. You will be paying back the cash you withdraw in monthly payments along with interest. You can repay the borrowed amount and continue reusing the card. However, you have to make sure that you do not exceed your credit limit.
In this type of working capital loan for subcontractors, you will be able to borrow the amount from a lender to buy material, supplies, and equipment. You will also get to enjoy flexible repayment terms, which are often up to 120 days.
This way, you can free your current cash to operate your business normally. You do not have to worry about personal and business assets, as the lender will use the equipment and material as collateral.
Small Business Administration Loans
If you are a subcontractor looking for a loan with bank rates, then SBA working capital loans for subcontractors can be helpful. If you are struggling to secure a loan from a conventional bank or private lender, SBA offers you specially designed loans to help you gain instant access to cash and maintain your cash flow.
The reason why lenders confidently offer you the loan is that SBA covers 85% of the loan amount, keeping lenders safe from any risks.
In working capital loans for subcontractors, you will borrow a sum of money and sell your outstanding customers’ invoices to the lender at their partial value. Your lender will offer 60% to 90% of your invoice's total value. It will then be the lender's responsibility to collect the invoices from customers.
Sometimes, a lender may give you the full amount of your invoices but charge you a fee until you pay back the full amount of the loan.
Business Cash Advance for Roofers
No matter what type of subcontractor you are, if you are running a business that is temporarily struggling with cash to manage your current projects, you can do with a business cash advance. This type of loan will allow you to sell your future/expected revenues to the lenders and get quick access to instant cash to fulfill your business needs.
This is somewhat similar to invoice factoring and does not come with terms like other traditional bank loans. Instead, you receive advance access to cash while the lender will collect all your future revenues from the projects on your behalf. A lender will give you a percentage amount of your future revenue.
Using Vergo App
VERGO is an app that allows you to get instant cash rewards when you spend the debit card on your business purchases. You can get extra cash on your business expenses and everything else. This can help you build your working capital while you spend. You will have a debit card solution that will allow you to gain access to money and ensure consistent access to working capital as per your needs.
So, if you are a subcontractor looking for ways to improve and manage your project's cash flow efficiently and smoothly. There are no ACH, check, or wire fees, no member fee, or minimum balance requirement fee. You will enjoy unlimited cash back on every spend and increase your working capital.
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