Working Capital Loan
Working capital loans are usually for the length of the selling season to be a period of up to one year. For example, if a company needs working capital to finance merchandise being prepared for the Christmas season (i.e., a toy manufacturer) or for the summer season (i.e., a boat manufacturer), a loan would be made until the inventory is sold and the money collected.
Unsecured working capital loans also typically require that they be paid off for a period of 30 to 60 days before they are re-established. By “resting” the loan for a good period, you establish that the working capital loan is not part of the equity structure of the company. Bankers feel comfortable with this concept.