In any small business, one of the most crucial components of success is access to operating capital. This money, also called working capital, is the funding to get you through the entire daily overhead that you will run into while running your company. When these funds are short, a working capital loan may be necessary to cover your expenses. Cash flow is a necessity if you have employees. Obviously, they expect to get a paycheck. Your utilities need to be paid, inventory may need to be stocked, and all of the other requirements that go into running a small business have to be covered. When your operating capital isn’t sufficient, for whatever reason, you need a solution. You need a reliable financial institution that you can turn to for help. You need a working capital loan.

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What Is a Small Business Working Capital Loan?

At its most basic level, working capital loans are a way to manage your daily operational expenses. Working capital is what keeps a company afloat day in and day out. If you need to cover these day-to-day expenses, working capital loans provide a way to keep businesses going with much shorter terms through much lower amounts. These capital loans aren’t used to purchase long-term investments or current assets, but rather work to fuel everyday needs. Working capital loans can cover anything from rent and payroll to debt payments and utilities.

Small businesses don’t always have the capital to cover daily operations and your business may not have time to wait around. Typically, seasonal or cyclical sales businesses reap the biggest benefits of working capital loans. Why? Well, these companies often have longer time periods where business activity is minimal and need to find different ways to find the capital that will keep their business running.

Retailers, manufacturing companies, or other types of businesses that don’t have stable revenue throughout the entire year still require accessible loan capital to maintain operations. We offer a way for businesses to pay wages or other required expenses through working capital loans. Working capital loans are then repaid during the busy season.

The most common types of working capital loans are a term loan, business line of credit, or invoice financing. A term loan is fairly self-explanatory — these are loans that have a repayment schedule with either a fixed or floating interest rate. A business line of credit works a bit differently, allowing you some additional flexibility. Businesses are able to borrow an amount up to a certain limit and only pay interest on what they actually borrow. They’re able to draw and repay as needed, as long as they don’t exceed their limit. Invoice financing allows lenders the ability to provide short-term borrowing that is dependent on unpaid invoices.

While these three aren’t the only types of working capital loans, they are the most popular. Whether you’re depending on flexibility or unpaid invoices for your working capital, we’re able to help you find the solution that will help your business.

Working Capital Loan Uses:

  • Cash flow to stabilize business bank account
  • Business expansion
  • Advertising/marketing
  • Improvement or remodel of existing facilities
  • Equipment
  • Inventory or supplies
  • Hire new employees
  • Emergency cash infusions due to extenuating circumstances
  • Emergency relief for accounts receivable issues

Types of Working Capital Business Loans:

SBA Loans for Working Capital

SBA Loans for Working Capital

The Small Business Administration (SBA) provides business loan programs and sets the underwriting qualifications and guidelines to provide guarantees to the issuers of these SBA loans in case of default. SBA loans can act as a working capital loan and are a great product for larger amounts of working capital that require long term financing. The qualifications are stringent and do require significant paperwork and time in business but they are well worth it in that they offer an attractive interest rate and duration to payback. Definitely worth look at to see if you qualify and have the time to deal with the process of securing business financing.

Product Overview

Rates: Interest rates 6.5% up to prime plus 1% to 2.75%.

Terms: 2 to 25 years

Fees: 1% to 4% origination fees

Payments: Monthly

Credit Score Standards: Must have good to excellent credit and deep credit history

Benefits and Best Uses of SBA Loans for Working Capital

SBA loans offer attractive business loan terms but they lack flexibility as they are not business lines of credit where you can draw money as you go or short term in duration. You receive a lump sum upfront and no ability to draw money with a fixed term and fixed payment. So when using this product for working capital make sure it fits your time horizon for additional capital in the future.

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Business Lines of Credit for Working Capital

Business Lines of Credit are the most flexible funding products. Business lines of credit operate a lot like a credit card in that it is an open revolving line of credit that allows for draws at any time up to a specific credit limit. While they are not technically a “loan”, they do as act as a working capital loan solution that can be drawn upon whenever your company needs capital fast.

Product Overview

Rates: Interest rates starting at 4.5% and up depending on many factors

Terms: revolving with renewals quarterly, 6 months or 12 months

Fees: 1% to 3% origination fees

Payments: Monthly

Credit Score Standards: Must have excellent credit and deep credit history

Special features: You can draw as little or as much money up to a credit limit at any time

Benefits and Best Uses of Business Lines of Credit for Working Capital

Business lines of credit have great rates, good terms, and low fees, but one word can explain why business owners choose this product, Flexibility. The ability to draw money at any time and use it when you need it is a must for any business owner’s financial toolbox. It is not uncommon for businesses to have this business product along with other products like term loans and credit cards. The use of the money can be used for a variety of different purposes but most common is general working capital.

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Short Term Business Loans for Working Capital

Short term business loans are loans that have a fixed lump sum offered upfront, with a fixed payback amount over a fixed term of time typically 6 to 18 months. When you cannot qualify for more traditional business loan products, short term business financing can be a great alternative. In defining short term business loans means terms typically from 6 months up to 18 months to repay. Rates are based on factor costs and not principal & interest and cost more than traditional business loans. The good news is these products require very little paperwork and credit requirements are much more forgiving than traditional loans. So, for a working capital loan that works with you, short term loans are a great option.

Product Overview

Rates: Factor rates starting at 1.10 up to 1.45

Terms: Typically 6 to 18 months

Fees: 1% to 5% origination fees

Payments: Weekly, bi-Weekly, monthly, and in some cases daily Monday-Friday

Credit Score Standards: All credit accepted from poor to excellent

Special Features: Fast process. Approval of funding can be the same day to 24 hours

Benefits and Best Uses of Short Term Loans for Working Capital

Unlike traditional loans, short term financing has higher rates, shorter terms, and fees but can come into the rescue the business that is in need of the money now and can’t get approved for more traditional loan products. The use of the money can be used for a variety of different purposes but most commonly used for cash flow problems.

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Merchant Cash Advance for Working Capital

Merchant cash advances, also known as a Purchase of Future Sales Agreements, advance a fixed sum of money upfront to a business owner with a discounted purchase price (also known as specified amount) to payback that is a greater amount than the lump sum upfront provided to the merchant. The advance is repaid by taking a fixed percentage of future credit card sales batches until the payback amount is paid back in full, there is no term limit with advances as the fixed back percentage never changes. The time frame to pay back depends on the volumes of future credit card sales. It’s estimated that this funding option is set up with expectations of being repaid in 6 to 18 months but again it may be longer or shorter depending on future credit card sales. This advance is another great rendition of a working capital loan that you can use to your benefit.

Product Overview

Rates: Factor rates between 1.09% up to 1.45%

Terms: No term limits estimated payback periods are 6 to 18 months

Fees: Typically 1% to 5% origination fees

Payments: Fixed percentage splits from future credit card batches

Credit Score Standards: All credit types considered from poor to excellent

Benefits and Best Uses of Merchant Cash Advance for Working Capital

Merchant cash advances do cost more than traditional bank financing with higher rates and fees but the flexibility of repayment which is attached to the fixed percentage of future sales really helps businesses that fluctuate in sales or are seasonal. Remember not all businesses are equal and sometimes traditional loan products are not an option for some. The use of the money can be used for a variety of different purposes.

Business Cash Advance for Working Capital

Business cash advances, also known as a Purchase of Future Sales Agreements, advance a fixed sum of money upfront to a business owner with a discounted purchase price, also known as a specified amount, to pay back that is a greater amount than the lump sum upfront provided to the business owner. The advance is repaid by taking a fixed percentage of future overall sales, which is different than a merchant cash advance which takes a percentage of future credit card sales. While an advance may not technically be a working capital loan, it can act as one. Payments are collected by a fixed daily or weekly payment deducted from a business bank account which is based on the fixed percentage of future sales. Every month, if the fixed payments take more than the set future percentage of sales than a refund back to the merchant can occur. This repayment continues until the payback amount is paid back in full, therefore, there is no term limit with advances as the fixed payback percentage ever changes. The time frame to pay back depends on the volumes of future overall sales. It’s estimated that this funding option is set up with expectations of being repaid in 6 to 18 months but again it may be longer or shorter depending on future credit card sales of the company. This can act as a working capital loan that is both flexible and reliable.

Product Overview

Rates: Factor rates between 1.09% up to 1.45%

Terms: No term limits estimated payback periods are 6 to 18 months

Fees: Typically 1% to 5% origination fees

Payments: Fixed ACH payments weekly or daily Monday-Friday

Credit Score Standards: All credit types considered from poor to excellent

Benefits and Best Uses of Business Cash Advance for Working Capital

When traditional financing is not an option, business cash advances can provide money in a pinch and allow a company to continue to operate smoothly. The costs are higher than traditional financing, but if used properly, a business cash advance can be a real lifesaver. The use of the money can be used for a variety of different purposes but a majority of the reasons is money to help the company with day to day operations.

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Business Credit Cards for Working Capital

Like credit cards, Business credit cards function as a revolving credit line in which a card is issued that can be used for both purchases and payments. Most small businesses use business credit cards in conjunction with other loan products that may be used for cash flow each and every day.

Product Overview

Rates: Interest rates start at 0% up to 28.99%

Terms: Revolving, no term limits

Fees: 1% to 3% origination fees

Payments: Low flexible monthly payments

Credit Score Standards: Must have good to excellent credit and deep credit history

Benefits and Best Uses of Business Credit Cards for Working Capital

The flexibility and access of money that business credit cards offer are second to none. The ability to both purchase items and use it to pay for bills or invoices can also free up short term funding problems and is very convenient.

The fast, convenient and straightforward way to get the money you need for your business – now! Get Your Quote Today by filling out our simple form.

Frequently Asked Questions:

Is Working Capital Financing Difficult to Obtain?

The short answer is no. Fast forward to 2020, there are a lot of ways to get funding for your company to use for working capital. The key is to evaluate all products you qualify for and find out which may be best for you and your business. Compare, shop, and save for your business needs.

What Are the Interest Rates for Working Capital Loans?

It is important to note that with a lot of different business financing options comes a wide variance in either interest rates which are principal & interest or business funding’s which are based on factor costs. Typical long term rates start at prime or treasury index plus 2.00% an up. Typical interest rates as of 2020 are 6.50% up to 28.99% for medium-term loans and factor rates vary from 1.09 to 1.45 of the funding amount. That is a big range and is dependent on financing products and your qualifications.

What Are the Benefits of Working Capital Loans?

Working capital loans are beneficial to small business owners because it stabilizes the cash flow of the company for any unexpected issues such as delay in accounts receivable, loss of revenue, or other emergency needs that may pop up.

Can I Qualify for a Working Capital Loan If I Have Bad Personal Credit?

The short answer is yes. If you have bad personal credit there are options such as short term loans, MCA, and BCA. Not to mention if you’re a company that qualifies for invoice financing where a credit check of a business owner is not needed.

What is Business Capital?

Business capital is just another word for working capital. It’s the money that you need for day to day operations in order to keep the company running smoothly. Small businesses require this type of capital in order to pay employees, pay utilities, or whatever else it takes for day to day growth. A working capital loan offers a solution that many small business owners can take advantage of for daily operations and quick cash flow needs that may arise.

Can I Get a Working Capital Loan If I Am a Start-Up Business?

The Small Business Administration (SBA) offers an SBA Microloan for start-up businesses but be forewarned as the process can be intense. Many documents will be required and the process as a whole will take weeks to learn your fate. The Small Business Administration’s microloan program offers small businesses anywhere from $500 to $50,000 in capital. The average SBA microloan is $13,000.

SBA Microloan

Maximum Loan Amount: $50,000

Loan term: Up to 6 years in term

Interest Rates: 6.99% to 13.99% (based on US Treasury index + interest)

Loan repayment terms vary according to several factors such as loan amount, planned use of funds, requirements determined by the intermediary lender, and the needs of the small business borrower

What Term Lengths Can I Get With Working Capital Loan?

Usually, business owners who want money for working capital will need frequent access to the money so shorter-term options like business lines of credit, business credit cards, and short term loans fill that use or need best.

How Much Will Working Capital Loans Cost in Fees?

Financing fees may vary based on the funding products and the company you deal with. Typically fees are 1% to 5% of the funding amount.

How to Apply for Working Capital Business Loans:

AdvancePoint Capital offers an easy business loan experience. Our customers love the fast, streamlined process and high approval rates that come from working with us. All credit scores are considered.

Applying for a loan with AdvancePoint Capital is as simple as a 1, 2, 3, 4 process. Start with this online form, then fill out the short application page, wait a few hours for your approval, and then get your money!

* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.