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Best Working Capital Loans of November 2024

Last updated on October 14, 2024
Written By Randa Kriss, Olivia Chen

Writer, Lead Writer

Edited By Sally Lauckner

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Working capital loans can be used to improve cash flow and finance short-term business expenses such as payroll, rent and utilities.
Working capital loans can cover day-to-day business expenses and help keep your business afloat when you face cash flow gaps. These are available to a wide variety of businesses and can often fund quickly, but come with frequent payments and can be expensive.

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    Best Working Capital Loans

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    SBA 7(a) loan

    Best for established businesses

    Max loan amount
    $5,000,000
    Min. credit score
    650
    Est. APR
    10.75-14.25%

    SBA 7(a) loan

    Best for established businesses

    Max loan amount
    $5,000,000
    Min. credit score
    650
    Est. APR
    10.75-14.25%

    iBusiness Funding - Online term loan

    4.5 

    Best for long-term funding

    Max loan amount
    $500,000
    Min. credit score
    660
    Est. APR
    15.22-45.00%

    iBusiness Funding - Online term loan

    Best for long-term funding

    4.5 
    Max loan amount
    $500,000
    Min. credit score
    660
    Est. APR
    15.22-45.00%

    Bluevine - Line of credit

    5.0 

    Best for fast loans

    Max loan amount
    $250,000
    Min. credit score
    625
    Est. APR
    20.00-50.00%

    Bluevine - Line of credit

    Best for fast loans

    5.0 
    Max loan amount
    $250,000
    Min. credit score
    625
    Est. APR
    20.00-50.00%

    Fora Financial - Online term loan

    4.5 

    Best for bad credit

    Max loan amount
    $1,500,000
    Min. credit score
    570

    Fora Financial - Online term loan

    Best for bad credit

    4.5 
    Max loan amount
    $1,500,000
    Min. credit score
    570

    Fundbox - Line of credit

    4.9 

    Best for newer businesses

    Max loan amount
    $150,000
    Min. credit score
    600
    Est. APR
    36.00-99.00%

    Fundbox - Line of credit

    Best for newer businesses

    4.9 
    Max loan amount
    $150,000
    Min. credit score
    600
    Est. APR
    36.00-99.00%

    American Express® Business Line of Credit*

    4.6 

    Best for low revenue

    Max loan amount
    $250,000
    Min. credit score
    660

    American Express® Business Line of Credit*

    Best for low revenue

    4.6 
    Max loan amount
    $250,000
    Min. credit score
    660

    A closer look at the best working capital loans

    SBA 7(a) loan

    Who should consider it: Established businesses with good personal credit that aren’t in a rush for funding.
    Notable features:
    • Maximum loan terms up to 10-25 years (depending on loan usage). 
    • Collateral required on loans over $50,000. 
    • SBA guarantees 50%-90% of loan amount (depending on loan type and size).

    iBusiness Funding (formerly Funding Circle)

    Who should consider it: Established businesses with good personal credit that need fast funding.
    Notable features:
    • Loan amounts range from $25,000 to $500,000. 
    • No prepayment penalties. 
    • Charges an origination fee.

    Bluevine

    Who should consider it: Businesses that need quick funding to cover gaps in cash flow.
    Notable features:
    • Can request draws directly through your dashboard. 
    • Line of credit comes with a free Bluevine Business Checking account. 
    • No prepayment penalties. 

    Fora Financial

    Who should consider it: High-revenue businesses that are having trouble qualifying for financing due to bad credit.
    Notable features:
    • Possible to increase your loan amount after you’ve paid down 60%. 
    • Offers prepayment discounts. 
    • Charges an origination fee.

    Fundbox

    Who should consider it: Businesses in need of fast cash that have a short time in business and/or bad credit.
    Notable features:
    • Choice of repayment terms (
      3
      or
      6
      months) for every draw. 
    • Can make draw requests through the mobile app. 
    • Line of credit amounts range from $100 to $150,000. 

    American Express® Business Line of Credit

    Who should consider it: American Express Business customers who can’t meet other line of credit minimum revenue requirements.
    Notable features:
    • No origination fee. 
    • Requires collateral.
    • Payment due dates and fees provided before you sign your loan agreement for transparency.  

    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.
    Did you know...
    is the amount of money available at any given time to meet short-term, or day-to-day, business needs. Net working capital is calculated by subtracting current liabilities from current assets. Current liabilities and assets are generally more liquid things like accounts payable, salaries, cash on hand or accounts receivable. Seasonality, growth stage and industry can all influence the ideal amount of working capital for your business.

    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 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.
    Loan Types
    Overview
    At a glance
    A is 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. Lines of credit provide 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.
    • Short, but flexible repayment terms.
    • Only pay interest on what you’ve drawn.
    • Revolving source of capital can be good to cover regular gaps in cash flow for strong-revenue businesses.
    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 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.
    • Government-guaranteed loans, issued by private lenders.
    • Long terms and low interest rates.
    • Financing up to $5 million.
    The CAPLines program, a subset of SBA 7(a) loans, offers lines of credit to businesses that want to use a revolving line of credit as needed while their business ebbs and flows.
    The also offers flexible credit lines with greater flexibility than the CAPLines and a unique fee structure.
    • The Working CAPLine to be used for working capital may come with higher fees than other CAPLines products.
    • Terms can go up to 10 years.
    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 , 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.
    • Term loans are repaid over a set period of time with interest.
    • on business bank loans range from 6.42% to 12.41%.
    • Rates from alternative lenders can range from 6% to 99%.
    With invoice financing, you can use your unpaid customer invoices as on a working capital loan. These loans are often used to cover cash flow gaps caused by the unpaid customer invoices themselves.
    Invoice financing is best for B2B companies that have a significant amount of cash tied up in invoices.
    • Invoice financing companies may advance as much as 90% of an unpaid customer invoice.
    • Invoice financing companies charge fees that can amount to APRs as high as 79%, depending on how quickly the loan is repaid.
    • Invoice financing usually has more lenient qualification requirements than more traditional loans.

    Pros and cons of working capital loans

    Pros

    Suitable for cash flow gaps and seasonal slows.

    Flexible funds that can be used for a variety of purposes

    Accessible to a wide variety of businesses.

    Can fund quickly.

    Cons

    Some lenders may require daily or weekly payments.

    May be expensive.

    Lenders may charge interest as a factor rate — which can make it difficult to understand the cost of your financing.

    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.
    • may make more sense if you have a poor credit history, though they will typically charge higher APRs than . Invoice financing loans also typically come from online or fintech lenders. 
    • (CDFIs), which can include credit unions and, 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. 

    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.
    1. 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. 
    2. Research lenders. Do some research to find lenders that suit your specific business needs, and make sure you understand their
    3. 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 and
    4. Apply with lenders. Online lenders can review applications in as little as a few hours, while banks tend to take longer.. 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. 

    Alternatives to working capital loans

    • 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 — don’t give as much weight to your credit score or business history as banks and online lenders do.
    • are a type of financing that you repay with a percentage of your future debit and credit card sales. Because 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.
    • 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.
    • can be an option when you need cash for working capital. This type of loan won’t, 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.
    NerdWallet writer Rosalie Murphy contributed to this article.
    Last updated on October 14, 2024

    Methodology

    NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
    Our star ratings award points to lenders that offer small-business friendly features, including: - Transparency of rates and terms. - Flexible payment options. - Fast funding times. - Accessible customer service. - Reporting of payments to business credit bureaus. - Responsible lending practices.
    We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
    NerdWallet does not receive compensation for our star ratings. Read more about our and our .

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