Easy to obtain with flexible payment plans, working capital loans can look like a dream come true for a small business owner. If you are in need of quick funding as a business owner and do not yet have a good credit history established as a business entity, a working capital loan could definitely be a logical solution. These loans are usually offered by typical financial institutions to business owners who have a steady flow of capital income they can prove. Even though simple, there are definitely a few problems that are all too easy to make with a working capital loan. check out these basic mistakes small business owners tend to make with working capital loans. 

Mistake: Taking a working capital loans without considering all repayment options. 

Why? Working capital loans are usually offered with easy repayment options that you get to choose as a business owner. For example, some lenders offer you the chance to make payments on a percentage-of-profits basis. This means that every month, your incoming cash flow will be figured and a set percentage of that money will be repaid as a loan payment. This is an easy way to repay for sure, but you do have to be careful. Once you have picked your repayment options for your working capital loan, you're pretty well stuck with it until the loan is repaid in full. 

Mistake: Not making timely working capital payments. 

Why? It can be incredibly exciting to learn that your small business is qualified to receive a working capital loan, so you may be quick to accept the loan being offered. But just like any other loan, this money does have to be paid back. If you miss payments on the working capital loan or you are slow to repay overall, chances are, you will not be able to get another loan in the future if you need it again. 

Mistake: Using the working capital loan money for something other than business expenses. 

Why? You have sunk everything you have into your small business. Now, bills are rolling in and you have personal expenses that need to be paid. You should know right off that working capital loans are not meant for these types of situations. Some lenders will actually require proof that you used loan money toward business, and not personal, expenses. Therefore, it is important that the money you obtain from a commercial lending service is used accordingly.