| Lender | Best for | Max loan amount▼ | Min. credit score▼ | APR range | Max term length▼ |
|---|---|---|---|---|---|
| U.S. Small Business Administration | SBA working capital loans | $5,000,000 | 650 | 11.50-15.00% | 25 years |
| Funding Circle 4.5/5.0 | Working capital loans for established businesses | $500,000 | 660 | 15.22-45.00% | 7 years |
| OnDeck 5.0/5.0 | Fast working capital loans | $250,000 | 625 | 27.20-99.90% | 2 years |
| Fora Financial 4.5/5.0 | Working capital loans for bad credit | $1,500,000 | 570 | See review | 1 year and 6 months |
| Fundbox 5.0/5.0 | Unsecured working capital loans | $150,000 | 600 | 36.00-99.00% | 6 months |
| Accion 5.0/5.0 | Working capital loans for startups | $250,000 | 570 | 8.49-24.99% | 5 years |
| American Express Business Blueprint™ 5.0/5.0 | Working capital loans for American Express customers | $250,000 | 660 | See review | 2 years |
| PayPal | PayPal Premier or Business account holders | $250,000 | 580 | See review | See review |
Best for SBA working capital loans
U.S. Small Business Administration
Max Loan
$5,000,000
Min. Credit Score
650
APR Range
11.50-15.00%
Max Term Length
25 years
Best for Working capital loans for established businesses
Funding Circle
Max Loan
$500,000
Min. Credit Score
660
APR Range
15.22-45.00%
Max Term Length
7 years
Best for Fast working capital loans
Best for Working capital loans for bad credit
Best for Unsecured working capital loans
Best for Working capital loans for startups
Best for Working capital loans for American Express customers
American Express Business Blueprint™
Max Loan
$250,000
Min. Credit Score
660
Max Term Length
2 years
Best for PayPal Premier or Business account holders
Best for
SBA working capital loans
The SBA 7(a) loan program includes term loans as well as line of credit options that you can use for working capital, seasonal expenses or costs to cover supplies and labor while completing a contracted project.
SBA 7(a) loan
Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
11.50-15.00%
7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Lowest interest rate
Max loan
$5,000,000
Min. Credit score
650
Apr range
11.50-15.00%
Best for
Working capital loans for established businesses
Funding Circle’s loans can fund within a matter of days, but you’ll need at least two years in business to qualify.
Funding Circle - Online term loan
Max Loan Amount
$500,000
Min. credit score
660
Est. APR
15.22-45.00%
Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.
May fund quickly
Max loan
$500,000
Min. Credit score
660
Apr range
15.22-45.00%
Best for
Fast working capital loans
OnDeck’s same-day business loans are available to business owners with credit scores of 625 or more.
OnDeck - Online term loan
Max Loan Amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
May fund quickly
Max loan
$250,000
Min. Credit score
625
Apr range
27.20-99.90%
Best for
Working capital loans for bad credit
Fora Financial offers working capital loans to borrowers who have a personal credit score of 570 or higher.
Fora Financial - Online term loan
Max Loan Amount
$1,500,000
Min. credit score
570
Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing or young but established small businesses looking for speedy financing.
Max loan
$1,500,000
Min. Credit score
570
Best for
Unsecured working capital loans
Fundbox offers working capital lines of credit up to $150,000. You do not need to put up physical collateral, but the lender does require a UCC lien, and in some cases, a personal guarantee.
Fundbox - Line of credit
Max Loan Amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.
May fund quickly
Max loan
$150,000
Min. Credit score
600
Apr range
36.00-99.00%
Best for
Working capital loans for startups
You may be able to qualify for a working capital loan from Accion with three months or more in business.
Accion Opportunity Fund - Small Business Working Capital Loan
Max Loan Amount
$250,000
Min. credit score
570
Est. APR
8.49-24.99%
Accion is a good option for businesses that haven't been able to secure traditional financing. The lender targets its funding efforts toward minority, women and low-to-moderate-income entrepreneurs.
Max loan
$250,000
Min. Credit score
570
Apr range
8.49-24.99%
Best for
Working capital loans for American Express customers
American Express offers business lines of credit that can be used as a working capital loan to make business purchases, address cash flow issues and other purposes.
American Express® Business Line of Credit
Max Loan Amount
$250,000
Min. credit score
660
The American Express® Business Line of Credit is a good option for business owners with fair credit who want access to working capital.
Max loan
$250,000
Min. Credit score
660
Best for
PayPal Premier or Business account holders
PayPal Working Capital loans are available to PayPal Premier or Business account holders. Loan amounts range from $1,000 to $250,000.
PayPal Working Capital Loan
Max Loan Amount
$250,000
Min. credit score
580
The PayPal Working Capital loan can help low-revenue business owners (with a PayPal account) access fast financing.
Max loan
$250,000
Min. Credit score
580
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What is a working capital loan?
Working capital loans are short-term loans that are best for covering gaps in cash flow for expenses related to your business’s day-to-day operations. This can include rent, payroll, utilities, supplies, inventory and accrued expenses like taxes.
Working capital loans may come in the form of business lines of credit, term loans, SBA 7(a) loans and invoice financing loans. Banks and credit unions, online lenders and other alternative lenders may all offer working capital loans.
What is working capital?
Working capital is the amount of money that you have available at any given time to meet your short-term, or day-to-day, business needs. Your net working capital is calculated by subtracting your current liabilities from your current assets. Current, or short-term, liabilities and assets are generally more liquid things like accounts payable, salaries, cash on hand or accounts receivable.
🤓 Nerdy Tip
Seasonality, growth stage and industry can all influence the ideal amount of working capital you need for your business. A business focused on growth, for example, may need a working capital loan so it has enough cash to purchase new assets, hire employees and rent a larger facility.» MORE: What is business capital?
When to consider a working capital loan
Here are some common situations where a working capital loan may make sense for your business:
- Inconsistent cash flow. For businesses that experience seasonal fluctuations in sales or have bill due dates that don’t always align with their monthly cash receipts, a working capital loan can be a good option.
- New business opportunity. Taking on a new client, accepting a large order or expanding a business operation can require more capital than a business has available. In these situations, additional cash can be accessed through a working capital loan.
- Unexpected expenses. Even with the best of planning, random expenses can disrupt a business’s budget. For businesses that don’t have surplus cash, a working capital loan can help pay for unexpected expenses or create an emergency fund for the future.
Types of business working capital loans
Several types of business loans can provide you with working capital. Repayment terms, funding amounts and interest rates vary based on loan type and lender, as well as your business’s qualifications.
Business lines of credit
A business line of credit provides a lot of flexibility, as you get access to funds up to a set limit and only pay interest on what you’ve borrowed. You can draw and repay funds as often as you’d like, as long as you make payments and don’t exceed your limit. But terms tend to be fairly short — potentially less than a year.
Working capital lines of credit are best for companies that need to get through a short-lived slowdown. You’ll need strong revenue in time to pay back your lender before the loan term ends.
SBA loans
SBA loans are partially guaranteed by the U.S. Small Business Administration and issued through participating banks, credit unions and online lenders. SBA 7(a) term loans and lines of credit provide up to $5 million for working capital, expansion or equipment purchases.
SBA 7(a) term loans are best for companies that need a lump sum of working capital while undertaking a pivot or expansion. The CAPLines program, a subset of SBA 7(a) loans, offers SBA lines of credit to businesses that want to use a revolving line of credit as needed while their business ebbs and flows.
The long terms and low interest rates of SBA loans make them one of the most affordable types of financing, though they can be slow to fund.
Term loans
While term loans are commonly used for financing an expansion, they can also be used as short-term working capital funding. Term loans provide a sum of cash upfront that is repaid over a set period of time with fixed, equal payments.
Term loans can be useful as business debt consolidation loans, helping reduce your debt load so you can use working capital more efficiently. In general, though, they can be a good choice for businesses that want flexible financing and have sufficient cash flow to make fixed payments.
Pros and cons of working capital loans
Pros
Working capital loans can easily provide your business with the funds needed to address slower periods, whether your business operates seasonally or is experiencing a one-off sales dip.
You can use a business working capital loan for a variety of purposes, such as purchasing inventory or supplies, making payroll and covering utilities.
Although some working capital loans require that you meet strong eligibility criteria, others — like online business loans or loans from other alternative lenders — can be more flexible.
Some online lenders can provide same-day financing, whereas others may take a few business days. More traditional lenders, however, will have a longer funding timeline.
Cons
Working capital loans typically have short repayment terms — and some lenders may require daily or weekly payments.
Some types of business working capital loans can carry high annual percentage rates (APRs) and other fees.
Certain lenders may charge interest as a factor rate — which can make it difficult to understand the cost of your financing — as well as compare it to other lenders. You should always try to translate the interest a lender charges into an APR to get a better sense of loan costs.
Where to get a working capital loan
Working capital loans are available from a variety of sources, including online lenders, banks and credit unions. It’s important to understand what kind of lender you want to work with, plus the benefits of each type of working capital loan, before you start applying.
- Banks and credit unions are good options for established businesses with collateral and strong credit, and tend to offer the lowest interest rates.
- Online lenders may make more sense if you have a poor credit history, though they will typically charge higher APRs than banks and credit unions. Invoice financing loans also typically come from online or fintech lenders.
- Community development financial institutions (CDFIs), which can include credit unions and nonbank lenders, may also offer working capital loans. CDFIs are usually missioned to lend to underserved or marginalized communities, so they may be able to offer lower rates with more relaxed criteria than traditional lenders. For example, Accion is a nonprofit CDFI that offers rates as low as8.49% for businesses that have been operating for at least a year and have a minimum570credit score.
How to get a working capital loan
The general process for getting a working capital loan doesn’t differ too much from any other business loan.
- Understand your financing needs. Working capital loans are typically for short-term business needs. Start by assessing if your business really needs capital now, or if you can qualify for a longer-term, more affordable loan. You’ll also want to determine how much capital your business needs.
- Research lenders. Do some research to find lenders that suit your specific business needs, and make sure you understand their business loan requirements.
- Gather business documents. You’ll need to provide financial statements like profit and loss statements, bank statements or tax returns, as well as business and legal documents, like your operating agreement and business plan.
- Apply with lenders. Online lenders can review applications in as little as a few hours, while banks tend to take longer. SBA loans can have the longest application timelines. If you’re approved for financing from an online lender, you could have access to your working capital within a few days. Again, bank and SBA lenders will likely take longer.
>> MORE: How to apply for a business loan
Alternatives to working capital loans
- Invoice factoring lets you turn unpaid invoices into fast working capital. The factoring company buys your invoices for an upfront payment minus a fee, and collects payment directly from your customer. Invoice factoring is best for B2B companies that are struggling to qualify for other types of financing. Since this isn’t technically a business loan — you’re selling an asset, not borrowing money — factoring companies don’t give as much weight to your credit score or business history as banks and online lenders do.
- Merchant cash advances are a type of financing that you repay with a percentage of your future debit and credit card sales. Because MCA lenders can make these withdrawals automatically, they usually give less weight to other qualification factors like your credit score. However, merchant cash advances usually have very high fees, making them a funding option of last resort. While invoice factoring is an option if you bill other businesses, MCAs may be available if you work directly with consumers.
- Business credit cards offer a revolving line of credit that you can spend up to a certain limit, and only pay interest on what you’ve spent, similar to business lines of credit. Business credit cards typically require good personal credit, but not a lot of time in business. They can be a good option to cover short-term gaps in cash flow as long as you are diligent about paying down the balance each cycle.
- Family and friends business loans can be an option when you need cash for working capital. This type of loan won’t build your business credit history, but it can be fast because there’s no application process, credit check or documents submission. However, while family and friends loans are typically informal, it’s recommended that you put the loan terms in writing to avoid any misunderstandings in the future that could affect your personal relationships.
🏦 Curious about SBA loans?
Here’s an overview of how SBA loans work, the types of SBA loans that are available, what each loan type can be used for and how to get SBA financing for your small business.
Last updated on May 20, 2024
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Our star ratings award points to lenders that offer small-business friendly features, including:
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Frequently Asked Questions
Working capital is determined by subtracting your business’s current liabilities from your current assets. Current assets include short-term assets such as cash, inventory and accounts receivable. Current liabilities include short-term liabilities such as accounts payable, loan payments and salary expenses.
The main benefit of a working capital loan is that it can help your business when you’re experiencing a cash flow gap or seasonal dip in sales. You can use a working capital loan to cover day-to-day operational expenses during these periods.
Some online working capital loans are available in amounts up to $500,000 or more, whereas SBA working capital loans max out at $5 million. Working capital loans are usually available in lower funding amounts since they’re used to cover short-term expenses.