While there are several types of working capital financing, they generally come with short terms and don’t require any specific collateral. For this reason, business financing companies tend to have strict eligibility requirements.
Find out what options are available for your business by selecting information about your credit score, time in business and funding needs.
How to get working capital financing
You can get a working capital loan by following these steps — though the order can vary depending on the type of business financing.
- Calculate how much working capital you need by using the working capital formula or estimating how much you need to borrow for a new project.
- Compare lenders that offer working capital loans, paying attention to the amount of funding available, rates, terms, fees and requirements.
- Prequalify with your top choices, usually by filling out a form online. If you’re applying with a bank or factoring company, you might have to call to ask for a quote.
- Fill out the application with your top choice after comparing prequalification offers.
- Submit any required documents, like recent bank statements, your business balance sheet, accounts receivable and accounts payable.
- Review and sign your loan offer, taking note of the rates, terms and due date.
Types of working capital loans and how they work
These are the main types of working capital business loans available through banks, online lenders and any other financial institution.
Short-term loans
Short-term loans are one of the most common type of working capital financing. While long-term loans are designed to finance large projects, short-term loans are designed to cover operating costs.
These give you all of the funds at once, which you repay plus interest and fees in monthly or weekly payments. Usually you can borrow from $1,000 to $500,000, with loan terms between six and 36 months. Rates can start at around 4% APR — but can top 90% APR in some cases.
These are best for businesses that only occasionally need working capital. While many lenders offer discounts to repeat customers, it’s not as convenient as a line of credit.
National Funding business loans
4.6
★★★★★
Finder score
National Funding is an online lender that offers working capital loans to most small businesses. Its rates are relatively low for an online lender. And its working capital loans come with terms of 12 months or less. But it requires daily payments, which can be difficult for some businesses to manage. And the rates and terms from its partners could be higher than expected.
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Pros
- Low minimum credit score
- Funding as soon as next-day
- Relatively low rates
Cons
- Daily payments
- Potentially higher rates from partners
- Doesn't disclose costs on website
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| Loan amount | $5,000 – $500,000 |
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| APR | Starting at 6.25% |
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| Min. Credit Score | 600 |
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| Loan term | 24 to 60 months |
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| Requirements | In business 6+ months and make at least $250,000 in annual sales. Other loan types have additional requirements. |
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| Loan amount | $5,000 – $500,000 |
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| APR | Starting at 6.25% |
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| Min. Credit Score | 600 |
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OnDeck short-term loans
4.6
★★★★★
Finder score
OnDeck's short-term business loans are designed for working capital. With minimal paperwork you can borrow as much as $250,000 with a turnaround as soon as the day you're approved in some cases. OnDeck accepts fair credit and has relatively flexible requirements compared to a bank loan — plus it only requires a lien on business assets. But while it offers reduced fees for repeat borrowers, OnDeck's APRs are some of the highest out there. You can likely find a lower rate with another lender, if you can qualify.
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Pros
- Same-day funding available
- Reduced fees for repeat borrowers
- Reports to business credit bureaus
Cons
- High starting APR
- Not all industries can qualify
- Daily or weekly repayments
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| Loan amount | $5,000 – $250,000 |
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| APR | Average is 60.9% |
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| Min. Credit Score | 625 |
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| Loan term | 3 to 24 months |
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| Requirements | Companies in business at least 1 year, $100,000+ in gross annual revenue, majority owner with a 625+ personal credit score, active business checking account |
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| Loan amount | $5,000 – $250,000 |
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| APR | Average is 60.9% |
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| Min. Credit Score | 625 |
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Lines of credit
A working capital line of credit gives your company access a credit limit, which your company can draw from as needed to cover short-term business expenses. Usually working capital credit limits stop at around $250,000.
This type of financing comes with slightly higher rates and fees than a term loan. Often, each withdrawal turns into a short-term loan, which you repay in installments over a term of six to 12 months.
These are best for small businesses that frequently need access to cash. But it can also be useful to have on hand to cover emergency expenses.
Fundbox lines of credit
4.2
★★★★★
Finder score
Fundbox is one of the few lenders that truly requires no paperwork on its lines of credit. Instead, it connects with your business's accounting software when you apply. There's no fee to make a withdrawal, and startups as new as six months can qualify for this working capital loan. But it charges weekly repayments and has a lower-than-average credit limit. Longer terms also come with higher rates.
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Pros
- No paperwork
- No draw fees
- Qualify with just six months in business
Cons
- Lower-than-average credit limits
- Higher fees for longer terms
- Weekly payments
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| Loan amount | $1,000 – $150,000 |
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| APR | 4.66% for 12-week terms and 8.99% for 24-week terms |
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| Min. Credit Score | 600 |
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| Loan term | 12 or 24 weeks |
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| Requirements | $30,000+ in annual revenue, 3+ months in business, 600+ FICO credit score, business checking account |
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| Loan amount | $1,000 – $150,000 |
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| APR | 4.66% for 12-week terms and 8.99% for 24-week terms |
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| Min. Credit Score | 600 |
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SBA loans
A Small Business Administration (SBA) loan is financing backed by the federal government. You can use most SBA loans for working capital, including the popular SBA 7(a) and Express loan programs. The SBA’s Working Capital CAPLine also offers small businesses financing specifically designed to cover everyday business operations.
SBA loans can run as high as $5 million in many cases. But how big of a loan your business can get depends on your business’s financial health. The application process can also take over a month, and lenders require a minimum personal credit score of 620.
Lendio business loans
4.8
★★★★★
Finder score
Lendio is an online business loan marketplace that can help your small business connect with an SBA lender. Its partners offer SBA 7(a) and Express loans, which your business can use for working capital expenses. Its online platform makes it easier to complete the application and keep track of documents. Plus it has personal funding managers on staff to help you out if you're stuck.
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Pros
- SBA 7(a) and Express loans available
- Simplified online application
- Staff can help with application
Cons
- Takes up to two months to fund after approval
- Not a direct lender
- Mixed reviews of customer service
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| Loan amount | $1,000 – $5,000,000 |
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| APR | Starting at 3% |
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| Min. Credit Score | 500 |
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| Loan term | 3 months to 25 years |
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| Requirements | Operate business in US or Canada for 6 months or more, have a business bank account, minimum 500 personal credit score, at least $20,000 in monthly revenue |
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| Loan amount | $1,000 – $5,000,000 |
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| APR | Starting at 3% |
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| Min. Credit Score | 500 |
|---|
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SmartBiz business loans
4.5
★★★★★
Finder score
SmartBiz is an online connection service that specializes in SBA 7(a) lenders and banks. It also offers packaging services to cut down the turnaround time from months to weeks — for a fee. But it's best for more-established businesses and owners who have good credit. And if you need less than $30,000, another lender is a better choice.
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Pros
- Offers packaging services
- SBA and non-SBA loans
- Faster SBA loan turnaround
Cons
- Packaging and referral fees
- Can still take up to 30 days
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| Loan amount | $30,000 – $500,000 |
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| APR | Prime Rate, plus 2.75% to 3.75% |
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| Min. Credit Score | 650 |
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| Loan term | 10 years |
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| Requirements | 650+ credit score, 2+ years in business, $50,000+ in annual revenue, no bankruptcies or foreclosures in past 3 years |
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| Loan amount | $30,000 – $500,000 |
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| APR | Prime Rate, plus 2.75% to 3.75% |
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| Min. Credit Score | 650 |
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Merchant cash advances
Merchant cash advances offer an advance on future credit and debit card sales for consumer-facing businesses. How much you can borrow usually depends on the past three to six months of revenue. And instead of having a loan term, you repay the advance plus a fee with a percentage of your daily sales.
Merchant cash advances are available to businesses in the startup phase and small business owners with bad credit. But it’s one of the most expensive financing options out there, with rates topping 300% APR in some cases.
Fora Financial business loans
4.1
★★★★★
Finder score
Fora Financial offers some of the lowest-cost merchant cash advance out there, with factor rates starting as low as 1.1. It also offers an early payoff discount and doesn't charge a monthly maintenance fee. Businesses that have been around for as little as six months can qualify as long as they have $5,000 in monthly credit card sales and no open bankruptcies. But it doesn't display rates online, and it can take as long as 72 hours to receive your funds.
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Pros
- Low cost for a merchant cash advance
- Only six months in business required
- Discount for early payments
Cons
- More expensive than most working capital loans
- Potential 72-hour turnaround
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| Loan amount | $5,000 – $1,500,000 |
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| APR | Varies |
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| Min. Credit Score | 500 |
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| Loan term | 4 to 15 months |
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| Requirements | 6+ months in business, $15,000+ gross monthly sales, no open bankruptcies |
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| Loan amount | $5,000 – $1,500,000 |
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| APR | Varies |
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| Min. Credit Score | 500 |
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Invoice financing and factoring
Invoice financing and factoring offer an advance on unpaid invoices for business-facing businesses (B2B). Invoice financing allows you to retain control of your accounts receivable as your customers pay them off, and is usually available for smaller amounts — say under $30,000 or $50,000. Invoice factoring involves selling unpaid invoices to a third party at a discount.
This type of business funding doesn’t rely on your credit score or time in business. But, like a merchant cash advance, it’s one of the most expensive financing options available and should be saved as a last resort.
Lendio business loans
4.8
★★★★★
Finder score
Lendio is an online marketplace that can help your business prequalify with multiple factoring companies, including TBS Construction Funding and Raistone Capital. You can receive up to 90% of your accounts receivable in as little as 24 hours. Factor rates start at 2%, and you have as long as a year to pay back the advance. But because it's not a direct lender, it's worth reading up on the companies you're connected with before you go through with the application.
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Pros
- Compare multiple offers from factoring companies
- Get funded in as soon as 24 hours
- Long term of up to 12 months
Cons
- Not a direct lender
- Doesn't disclose requirements for factoring
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| Loan amount | $1,000 – $5,000,000 |
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| APR | Starting at 3% |
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| Min. Credit Score | 500 |
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| Loan term | 3 months to 25 years |
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| Requirements | Operate business in US or Canada for 6 months or more, have a business bank account, minimum 500 personal credit score, at least $20,000 in monthly revenue |
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| Loan amount | $1,000 – $5,000,000 |
|---|
| APR | Starting at 3% |
|---|
| Min. Credit Score | 500 |
|---|
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Microloans
Microloans are are short-term loans from nonprofit lenders. Unlike most financial institutions, microlenders often offer financing to entrepreneurs who need working capital to start a new business. These often don’t require collateral or come with strict credit score minimums.
Usually you can borrow up to $50,000 with terms from six to 12 months. But these can take weeks to fund and rates often start a little higher than an online or bank loan.
Kiva business loans
3.7
★★★★★
Finder score
Kiva is a nonprofit that offers crowdfunded microloans of up to $10,000 with a 0% APR. There are no credit or time in business requirements. But to qualify, your business must raise funds from at least five members of your social network over 15 days. After that, most small businesses can receive your funds within 30 days. The long turnaround may be worth the 0% APR in some cases.
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Pros
- No interest or fees
- Loans as small as $1,000
Cons
- Can take up to 45 days
- Relies on social network
- No customer service line
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| Loan amount | $1,000 – $10,000 |
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| APR | 0% |
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| Loan term | 6 months to 3 years |
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| Requirements | Have at least ten friends and family members willing to contribute to your loan, live in the US, ages 18+, not in bankruptcy or foreclosure, not under any liens, not engaged in: multi-level marketing, direct sales, pure financial investing or illegal activities |
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| Loan amount | $1,000 – $10,000 |
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| APR | 0% |
|---|
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How to use the funds
You can use the funds from a working capital loan for almost any operational costs. Small businesses often use this type of business financing to pay bills, pay employees or refinance debt.
Many also use a working capital loan to take advantage of a new business opportunity or prepare for a seasonal increase in sales. For example, businesses often need extra working capital to pay for hiring expenses, inventory and advertising.
How to qualify
Your small business generally needs to meet the following requirements to qualify for a working capital loan.
- At least 12 months in business
- Annual revenue of $100,000 or higher
- Good credit score of at least 670
- Business bank account
You don’t necessarily need to meet all of these requirements to qualify. In fact, there are business financing options for every type of business — including startups and small business owners with bad credit. But you’ll have more of a selection to choose from if you meet these requirements.
Bottom line
A working capital loan can give your business funding to cover operating expenses or grow when your current assets aren’t enough. And there are a variety of business funding options for startups, established firms and all credit types.
But consider another type of business loan if you want to invest in a long-term project or make a large purchase. Compare more options with our guide to the best business loans of 2024.
