Working capital loans

What is a working capital loan?

Working capital is current assets minus current liabilities: the cash, receivables and inventory you have to run the business, less the bills due soon. A working capital loan tops that up. Unlike equipment or real estate financing, there is no asset behind it, so the lender is relying on your cash flow and your personal guarantee.

In practice the phrase is marketing. An online lender's working capital loan is a short term loan. A bank's is a line of credit. The SBA's is a 7(a) term loan. Ask what the product actually is before you compare prices.

Who qualifies for a working capital loan?

It depends on which product is behind the name. Banks want two years in business, 680 credit and profitable returns. Online lenders want six months to a year, 550 to 600 credit and $8,000 to $10,000 a month in deposits. SBA lenders sit at the bank end with more flexibility on collateral.

• Declined most often: businesses whose bank statements show the gap is permanent rather than temporary, with falling balances and growing overdrafts month after month.
• Under one year in business, read financing under one year first; most working capital lenders will not look.
• Seasonal businesses are a good fit if you can show the same pattern last year. See seasonal business financing.

What does a working capital loan really cost?

A typical example from an online lender: you borrow $75,000 over 18 months at a factor rate of 1.3. You repay $97,500 in 78 weekly payments of $1,250. The fee is $22,500, and the APR is roughly 35%. The same $75,000 as a bank line of credit at 12% drawn for the same 18 months would cost about $13,500 in interest, and far less if you repaid as cash came in.

That gap is why it pays to apply for the cheaper products first even if they are slower. Use the business loan calculator to compare any two offers on the same footing.

How do you qualify, and what documents do you need?

Online lenders need three to six months of bank statements, formation documents and an ID. Banks and SBA lenders need two years of tax returns, interim financials, a debt schedule and a personal financial statement. All of them read your bank statements first, looking for steady deposits and a balance that stays positive.

Pull the list from our document checklist. The one thing to prepare beyond documents is a one paragraph explanation of the gap: what caused it, when it closes, and what the loan buys. A lender who understands that a $60,000 receivable lands in 45 days underwrites very differently from one who sees only a shrinking balance.

How long does a working capital loan take?

Online lenders typically fund in one to seven days. Bank lines of credit take two to four weeks, and SBA working capital loans 30 to 90 days. The speed you need usually decides the product, and the product decides the price.

If the gap is predictable, the cheapest move is to open a line of credit in a calm month and leave it unused. If the gap is already here, cash flow gap financing walks through what closes in days versus weeks, and how long business loans take covers each lender type.

When should you choose something else?

Choose invoice financing if the gap is caused by unpaid invoices, because it is cheaper and sized to the invoices rather than to your credit. Choose a line of credit if the need repeats, because you pay only for what you use.

Choose nothing if the gap is structural. A business that loses money every month does not have a working capital problem; it has a margin problem, and a 35% APR loan makes it worse. Fix pricing or costs first, or the loan simply moves the failure date forward and adds a personal guarantee to it.

How do you apply for a working capital loan?

Apply once on this site and your application reaches every lender type that sells working capital: banks, SBA lenders, online lenders and invoice financing, so the cheapest product you qualify for appears next to the fastest. It is free for your business, and we are paid the same whichever lender you choose. You can also ask your AI assistant to apply through our MCP server; it reads your statements, fills the application and submits it.