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 cash on hand to get you through the entire daily overhead that you will run into while running your business. When these funds are short, a business 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 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 business 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 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 cash on hand 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 best fits your business needs.

Working Capital Business 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 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 for decisions but they are well worth it in that they offer attractive interest rates and time durations 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 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 business 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.

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 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 and cash flow needs.

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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 business loans.

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 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 Business Loans for Working Capital

Unlike traditional business loans, short term business 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 business 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 merchant cash advances are 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.

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 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 a seasonal business. Remember not all businesses are equal and sometimes traditional business loan products are not an option for some. The use of the money can be used for a variety of different purposes but a majority of money is cash flow needs.

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. Payments are collected by a fixed daily or weekly payment deducted from 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 business cash advances are 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 dentist practice.

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 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 for a business, business cash advances can provide money in a pinch and allow a business 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 are cash flow to help the business.

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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 businesses use business cred cards in conjunction with other business loan products

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 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 cash flow 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 a loan for your business to use for working capital. The key is to evaluate all products you qualify for and find out which is best for you and your business. Compare, shop, and save!

What Are the Interest Rates for Working Capital Business 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 business loans and factor rates vary from 1.09 to 1.45 of the funding amount. That is a big range and is dependent on business loan products and your qualifications.

What Are the Benefits of Working Capital Business Loans?
Working capital loans are beneficial to business owners because it stabilizes the cash flow of the business for any unexpected issues such as delay in accounts receivable, loss of business revenue or other emergency cash flow needs.

Can I Qualify for a Working Capital Business Loan If I Have Bad Credit?
The short answer is yes. If you have bad credit there are options such as short term business loans, merchant cash advance and business cash advance. Not to mention if you’re a business that qualifies for invoice financing where a credit check of business owner is not needed.

Can I Get a Working Capital Business 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 Business 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 business loans fill that use or need best.

How Much Will Working Capital Business Loans Cost in Fees?
Business loan fees vary based on the business loan products and the company you deal with. Typically fees are 1% to 5% of the business 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!

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.

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* 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.