Working Capital Loans for Small Business

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Working capital loans are short-term options that you can use to boost your business' cash flow, pay for day-to-day expenses, and make short-term investments.

These typically do not require collateral and can be used for almost anything that your business needs.

They are mainly available from any lender other than banks. Approval times are generally very fast — making them an ideal option for businesses looking for a quick, short-term financing solution.

Repayment terms may be anywhere from three months to three years, with payments having to be made on a daily, weekly, or monthly basis. Interest rates are typically higher than traditional business options and can be as high as 45%.


When to Use a Working Capital Loans for Small Business

They can be a great resource for businesses as they can be used for nearly any business-related expenses.

Here are a few of the reasons you may want one:

  • Purchase inventory
  • Pay employee salaries
  • Hire seasonal employees
  • Invest in new business opportunities
  • Expand your marketing efforts
  • Debt consolidation

These are not a long-term financing solution and are not meant to cover major expenses. However, they can be a great option for your business' short-term operational needs.

Types of Working Capital Loans for Small Business

There are several different types of working capital loans for small business available. Each option offers a number of advantages and disadvantages. As such, it is important to review your options to determine which type meets your needs.

Here are a few of the most common ones available:

  • Short-Term Options: Short-term business debts can have very generous borrowing limits to help your business cover its most urgent expenses.
  • Invoice Factoring: This type of financing involves selling your business' invoices to a factoring company in exchange for a cash advance.
  • Merchant Cash Advance: This solution allows you to take out a cash advance which you repay with a percentage of your daily credit card sales.
  • Business Line of Credit: Gives you access to a revolving line of credit which you can utilize on an ongoing basis.
  • Business Credit Credit: Offers great rewards, revolving credit, and immediate access to financing as you need it.

These are a few of the great short-term financing solutions businesses can use to boost their working capital.

Pros & Cons of Working Capital Loans for Small Business

Advantages they offer include:

  • Fast approval and disbursement time
  • Wide range of applications
  • Increased cash flow
  • No collateral required
  • Easy to qualify for

While these products offer a number of advantages, they are not without their disadvantages. The cons include:

  • High cost due to high-interest rates and fees
  • Short repayment terms
  • Frequent payments required
  • Do not always contribute to your business' credit

All things considered, if your business can afford the high-interest rates and short repayment terms, they are a great option if you need immediate financing.

Requirements for Working Capital Loans for Small Business

These are generally easier to qualify for than other options, but there are still a few requirements you need to meet.

To qualify, you will need to provide:

  • Business and personal credit score
  • Bank statements
  • Financial projections
  • Sales figures
  • How you plan to use the capital
  • Business and personal tax returns

It is important to check with your lender to find out which additional documents you need to provide before securing financing.

How to Apply to a Working Capital Loan for Small Business

Determine What Type is Best for You

As mentioned previously, there are several different types of working capital loans for small business, including:

  • Short-term
  • Invoice factoring
  • Merchant cash advances
  • Business lines of credit
  • Business credit cards
  • And more

Each option has different requirements and terms. It is important to review your options before moving forward in order to determine which solution meets your business' needs.

Find a Lender

Finding a lender online is incredibly easy, but it is important to research and compare at least three to four different lenders.

Consider getting pre-approved at multiple lenders before choosing one. Pre-approval will allow you to compare quotes from lenders based on your financial information.

Be sure to also review the additional costs and fees charged by each lender to ensure that you are not blindsided by any unexpected expenses.


Each lender has its own application requirements, but most will ask you to provide:

  • Bank statements
  • Tax returns
  • Personal identification
  • Business information (i.e. entity type, industry, date of incorporation, etc)
  • Your SSN
  • And more

After completing your application, be sure to stay in contact with your lender in case you need to provide any additional documents or information.