Unsecured Business Loans for Working Capital 

Being a commercial finance provider, we are aware at Nucleus of the many reasons a company can come into a struggle over their short-term liquidity. It isn’t unusual, and most consider it just another part of long-term business. 

While working capital is essential for the lifespan of any SME, and ensures the daily operations of a business, sometimes it is necessary to make the move for an expansion, or take advantage of a supply opportunity which can briefly cause a minor problem in more immediate finances. 

With unsecured business loans being quicker and easier than ever to access through us due to our integration with Open Banking software, it is an ideal time to boost your working capital without the need of collateral. If you believe your business may be approaching a rough working capital patch, be it positive or negative, and are looking for a competitive, hastily accessed loan to smooth over the gap, read on to learn more about understanding working capital, and whether or not an unsecured business loan might be the correct option for resolving your liquidity issues. 

Understanding Working Capital 

Working capital is simply a term for describing the available funds your business has for its day-to-day operations, and is calculated as ‘current assets minus your current liabilities’. It is an important measure of a business’s ability to pay its short-term financial obligations, and essentially demonstrates how efficiently you are trading or operating. 

It is likely your industry will dictate your business’s unique working capital situation and reasons for why you might need to secure a loan to aid. For example, retail businesses are more likely to require and maintain a substantial inventory of products, firms that sell a service however will have a larger proportion of receivables, (money owed but not yet paid). 

Understanding the nuances of your own company’s working capital balance, and knowing when you will need an unsecured business loan to temporarily support that means you can react proactively to support a large new purchase or expansion before falling behind on funds. 

Key Components of Working Capital 

Key Components of Working Capital 

There are a number of important metrics that go into monitoring and maintaining a healthy working capital, which also creates more variables when considering how an unsecured business loan can go into helping your business maintain a long-term financial health. 

• Cash and Cash Equivalents: 

Cash is all important for a business’s health, without it there is no working capital, which is why expert cash management is vital. Investment opportunities of any kind for SMEs should not be shied away from if it is the intention to keep growing, and is one of the largest reasons why businesses across all sectors opt to take out a business loan. 

• Accounts Receivable (AR): 

The cash owed to a business does not always arrive on time, and in fact relies on a number of factors, starting with effective AR management. Even with decent vetting on customer credit risks and good customer relationships, accumulated AR delays do sometimes happen. Whether it’s through an acknowledged delay, or for a series of unforeseen circumstances, unsecured business loans can help bring AR gaps that might leave a business otherwise struggling to uphold its own financial obligations. 

• Inventory: 

Within recent years, companies across many sectors have begun to understand the influence supply chains have on inventory. From the hospitality and healthcare sector, to service based firms that rely on materials from other companies, almost anyone has the potential to be heavily affected by a sudden shortage of inventory. Having inventory management systems in place to optimise stock isn’t always enough to avoid issues, however if you are aware the problem is only short-term, a similarly short-term unsecured business loan can provide a perfect solution to pass the unexpected hurdle. 

• Accounts Payable (AP): 

Accounts payable is another critical metric for businesses to measure their financial health, and predict whether or not an unsecured business loan might be necessary to cover sudden costs, whether it be for taking advantage of an opportunity, or an unforeseen price hike. Regardless, well managed AP means companies can predict these fluxes, and if necessary, secure themselves an appropriate facility. 

• Short-term Debt: 

For most businesses, taking on short-term debt in the form of unsecured business loans becomes a regular metric of their working capital, with companies using them as part of their financial strategy to maintain lasting health. 

Ensuring your working capital remains healthy should be a foremost concern of any business owner, however, avoiding opportunities at all costs for the thought of falling into negative liquidity may not be the best course of action if your long-term objectives involve expanding your enterprise. Short-term loans can be the ideal solution to chasing these longer term goals.

 

What kinds of financial obligations can be met with working capital? 

Through our unsecured business loans, prospective borrowers can secure anywhere between £10k and £2m, making them an incredibly versatile facility that can serve as a strategic tool for managing and enhancing working capital in several ways, including: 

• Bridging Cash Flow Gaps 
• Inventory Management 
• Accounts Receivable Financing 
• Emergency Funds 
• Growth and Expansion 

When considering the number of metrics that well managed working capital is vital for, it becomes easy to understand how a well leveraged short-term business loan can also be used to position your business for sustainable growth. By maintaining operational liquidity, immediate obstacles or opportunities can be secured while you continue to push for long-term success. 

Advantages of Using Unsecured Loans for Working Capital: 

• Flexibility: The funds you access can be allocated as needed across various working capital components, be anywhere between bridging cash flow gaps to growth and expansion. 

• Speed: Thanks to our open banking integrations it is faster and easier (assuming you meet the necessary criteria) than ever to access the funds you require for immediate working capital needs. 
• No Collateral: Our unsecured business loans do not require any collateral, eliminating the risk of losing assets and preserving your business’s asset base for future growth. 

Considerations and Best Practices: 

• Cost-Benefit Analysis: Before committing to any loan, businesses should assess the interest costs against the potential benefits to working capital and cash flow. While our experts can advise you on any facility you seek, we always advise that you speak to your own financial advisor before pursuing us or any other lender. 
• Short-term Use: Our unsecured business loans are ideally suited for short-term working capital needs given the typically higher interest rates. 
• Creditworthiness: If you have maintained a strong credit profile across the history of your trading it is likely that you will secure more favourable loan terms. 

Unsecured business loans can work out to be an effective solution to not only assist in managing working capital, but also enhancing what a business is capable of doing financially. By understanding your own business structure and industry, and many metrics that are involved in sustaining your working capital, you can focus on potential goals and opportunities that other unwilling competitors may not be prepared to grasp. 

Getting an unsecured business loan with Nucleus 

Nucleus is one of the UK’s leading alternative fintech lenders, specialising in offering quick and flexible loans to businesses of all sizes and ages. Through our open banking integrations we are capable of determining appropriate facilities for your business within a matter of minutes, and can help you in securing necessary funding within hours. 

If you would like to know more about how Nucleus Commercial Finance can support your business growth with tailored financial solutions, don’t hesitate to reach out to our familiar team of financial experts. We will be more than happy to discuss our range of products with you and help to find the perfect fit for your current business needs. 

Contact us on 020 7839 1980 or request a callback at your convenience through our website, and let us start a lasting relationship today.