A business loan that is raised for the purpose of smooth day-to-day running of a business is a general working capital loan. However, there are very few times when companies need to raise money for their daily tasks. Therefore, working capital loans can also be termed as a real lifesaver in many types of situations.

A typical company has various types of financial needs. These financial needs can be anything from buying equipment, opening new branches, or remodeling or rebuilding existing ones, to promotional or advertising programs, to paying down some type of debt. And all of these needs cannot always be met by government business loans. Government business loans are not easy to obtain and take a long time to materialize.

Therefore, a working capital loan is the best way to address multiple needs. It is much better than a bad credit small business loan as the financing here is done in much less time.

A general working capital loan can be formulated as a secured or unsecured loan. A secured loan is one in which a guarantee is received in exchange for the money. The collateral can be anything like a factory, a house, inventory, or even jewelry. These assets can also be given as collateral even if there are mortgages on them.

Although the amount of collateral for a working capital loan can differ between banks, almost all of them generally look at information like credit scores and other small business loan information to see your credit payment history. Some banks even ask for collateral from the borrower.

Unsecured working capital loans are made only to those with very good credit history and little or no risk of default. These loans are usually taken to start a business and sometimes also act as small business debt consolidation loans.

A working capital loan comes with its share of pros and cons. The most important advantage is that it is the greatest source of fast or immediate cash. For people with bad credit and depleted business loans, this is the best alternative. These types of loans can help overcome the cyclical upturns that occur in all types of businesses. It is even considered better than government small business loan as it can provide quick money to avoid short-term impacts on the business.

However, the biggest disadvantage of a general working capital loan is that they only meet short-term needs. They are insufficient for long-term projects or plans or situations that require a lot of cash.