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Small Business Working Capital Loans: Get Quick and Flexible Financing

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Small Business Working Capital Loans: Get Quick and Flexible Financing

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What are working capital loans for small businesses?

When small businesses need funds for everyday expenses like payroll or utilities, a working capital loan can help. This type of financing comes in many different forms, but can provide a business owner with quick and flexible cash needed to make ends meet. These loans are typically paid back on a short-term basis but help solve a cash flow problem immediately. 

How do working capital loans work?

There are really countless ways a small business owner could utilize a working capital loan. From managing seasonal bursts of business to paying for an emergency repair, working capital loans offer the flexibility many business owners are looking for when it comes to financing. Some popular lending products classified as working capital loans include short-term loans, lines of credit, merchant cash advances and invoice financing. The specifics of how the loan works will vary depending on the type of loan you choose. 

What are the requirements for getting a working capital loan?

Working capital loan offers can vary greatly based on the product and the strength of the borrower’s individual financial history. That’s why it’s crucial to take the time to do your research and understand what each small business working capital loan is offering by shopping around and comparing rates. 

If you’re looking for an easy-to-use and seamless way to compare loan offers and understand your options, mySMBscore can help. After entering some basic information about your business, you’ll be able to see our AI-powered analysis to review your business credit memo and see your business through the eyes of a lender. 

When you apply for a working capital loan, you’ll likely have to meet a minimum annual revenue requirement and have good personal and business credit. The good news is that you likely won’t have to put down any down payment to guarantee the loan, which can be helpful for business owners who don’t have any collateral for a traditional term loan. 

How much can I borrow with a working capital loan?

It can really depend, based on the lender and the applicant’s needs. For example, an SBA working capital loan maxes out at $5 million, while other online lenders who offer working capital loans won’t loan more than $500,000. Make sure to understand how much money you need to borrow first so you can ensure you’re going with the right lender for your needs. At mySMBscore you can better understand your business credit score and how it will be used when applying for a working capital loan. These insights can help you understand how much you might qualify for. Plus, you’ll need to consider what your business can afford to repay. 

What is the interest rate for a working capital loan?

While working capital loans definitely have their advantages, they often come with higher interest rates. Rates will vary based on your loan product and eligibility, but don’t be surprised to see interest rates between 16% and 35% on average. 

How quickly can I get a working capital loan?

If you need cash in a pinch, a working capital loan can help, thanks to quick approval times that some lenders can offer. Most working capital loans have less paperwork than traditional loans, and you can get approval online in just a few hours from many online lenders. From there, funding times can vary. If you need funds expedited, consult with the lender before taking out the loan to make sure the timeline meets your needs. 

What can I use a working capital loan for?

Whether you need to cover an emergency cost or are looking for a quick source of funds for a purchase, there are countless ways you can use a working capital loan. Generally, working capital loans are helpful to fund gaps in business expenses like payroll, operational costs or seasonal periods of slower business. 

What are the pros and cons of a working capital loan?

It’s important to always consider the pros and cons of taking out additional debt since there can be serious consequences to adding irresponsibly to your debt. But, when it comes to working capital loans, there are also some great benefits for business owners who are in a pinch. Here are some of the key pros and cons of a working capital loan. 


  • Generally more accessible than a traditional loan: Most working capital loans have online applications that can give you approval within just a few hours, although approval and funding times can vary.
  • Wide range of flexible terms: With several different options, there are a lot of opportunities to customize payments and terms to fit your needs best. 
  • Fast funding turnaround times: You can get access to your funds in as quick as a few days in some cases. This can be helpful for business owners who need cash fast. 


  • Higher interest rates: While convenient, working capital loans are historically known for some of the highest interest rates. Make sure you’re aware of this and the total cost to borrow when it comes time to apply!
  • More regular payments: Working capital loans can have shorter payment periods than some other loans. 
  • Consequences to credit score if you don’t repay: As with any debt, you will face consequences to your personal credit and business credit score if you fail to repay. If the loan is backed by collateral, the lender can seize the collateral. 

How do I apply for a working capital loan?

The first step to getting a working capital loan is to figure out what kind of loan you want to get. You can explore your options and figure out which is best for your business needs. mySMBscore can help you compare rates and view your business credit score through the eyes of a lender, so you know exactly what you’re qualified for.

How long is the repayment period for a working capital loan?

Keep in mind - working capital loans can have shorter repayment periods. For example, a merchant capital advance will take a percentage of each sale you complete making it a regular repayment. Other working capital loans like invoice factoring will take a portion of your outstanding invoices upon payment. So, repayment periods can really vary. 

What is the difference between a working capital loan and a traditional loan?

While working capital loans are technically under the broader umbrella of a loan, the key difference is that a working capital loan usually doesn’t require any capital to obtain. This can help small businesses find a flexible way to get financing and close a gap in their cash flow. 

What are the types of working capital loans available for small businesses?

Good news! There are several different types of working capital loans available depending on what you’re looking for. Here are some of the most common options: 

  • Invoice factoring: If you run a business that sends out invoices, you might find invoice factoring a good option for a working capital loan. With this option, you will sell your outstanding invoices to a third-party company, which will offer the outstanding amount minus any fees.

  • Merchant capital advances: For businesses that collect payment via credit card processing, merchant capital advances are a popular lending tool. This can give business owners a lump sum of money, which then you’ll repay by providing a percentage of their credit card transactions to the lender.

  • Business line of credit: If you’re looking for a revolving line of funds to pull from on a regular basis, a business line of credit can be a great solution. You can repay funds on a regular basis and continue borrowing from the same line of credit over the borrowing period. 

Can I get a working capital loan with bad credit?

Some working capital loans don’t require a credit check, but generally, the better credit you have, the better your options are for a small business working capital loan. Each lender will have different credit requirements, so it’s important to fully understand your options and how your personal and business credit score will affect your eligibility.

When you use mySMBscore, you can get that knowledge and insight to understand how your credit score could impact your loan eligibility. Then, you can learn how to improve with clear and actionable steps thanks to our AI-driven solutions, guiding you to the smarter financial decisions for your business. 

What collateral is required for a working capital loan?

If you choose an unsecured working capital loan like an invoice factoring option, you won’t need to put any collateral down — your invoices will serve as the collateral. Each working capital loan will require different things, but the better your credit rating is, the less likely you’ll have to put down collateral. 

How do I determine the amount of working capital loan I need?

The general formula for determining working capital is to subtract your current liabilities from the company’s assets. From there, you can calculate your working capital ratio by dividing total current assets by total current liabilities. This can provide you with a good idea of how much working capital you have and how much you might need. Ideally, you’ll want your working capital ratio to be between 1.2 and 2.0, but this could vary based on your industry. 

How often do I need to make payments on a working capital loan?

Your payment schedule for a working capital loan can depend on the loan product you opt for. Some working capital loans operate on a short-term payment schedule with daily or weekly payments. Others, like a business line of credit, generally require monthly payments. Make sure to understand how your repayment terms are structured so fully you can make on-time and consistent payments. 

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