Check your eligibility for Coronavirus Business Interruption and Bounce Back Loans
- Apply online within 3-5 minutes
- Free quotes with no impact on your credit score
- Regulated by the FCA and accredited by HM Treasury
Maintaining a healthy working capital is vital to keeping your small business going – and a key financial indicator to look at if you want to grow it.
But how do you do that? And what if you need help? Let’s take a look at loan options that can help your business’s working capital.
Your working capital is basically what your business can afford to spend once you’ve paid off all the current expenses. If it’s a positive figure, it means your business has the cash it needs to operate daily – and if it’s very positive, you may use it to grow the company.
The basic formula to calculate your current working capital is: current assets – current liabilities = current working capital. “Current assets” means cash or credit that you can easily turn into cash (for example, invoices your clients will pay within 12 months) and “current liabilities” are all the expenses your business needs to pay (such as rent, wages or debts that you have to settle within 12 months).
As you may have guessed at this point, the concept of working capital is very similar to cash flow (and operating liquidity).
The term “working capital finance” doesn’t refer to a specific type of business loan. It’s about giving your month-to-month working capital a boost – perhaps during a period when a business is undertaking some special project. There are a series of business finance options you can choose from, and some of them are better than others for working capital fluctuations.
Business finance options can generally be divided into two main categories:
Here is a non-exhaustive table of some of the most common types of business finance available.
|Type of finance||Security||Repayment terms||Good for||Bad for|
|Business credit cards||Revolving||Unsecured||Flexible – no interest is charged if you pay monthly|
|Overdrafts||Revolving||Unsecured||Flexible – but the longer you borrow, the more you’ll pay|
|Business line of credit||Revolving||Secured or unsecured||Flexible – but the longer you borrow, the more you’ll pay|
|Invoice financing||One-off||Secured against your invoices||Short-to-medium terms – tied to invoice payments|
|Merchant cash advances||One-off||Unsecured||Short-to-medium terms – tied to credit card takings|
|Asset financing||One-off||Secured against business assets||Medium-to-long terms – usually repaid in monthly instalments|
|Short-term business loans||One-off||Unsecured||Short terms – usually repaid in monthly instalments|
|Business loans||One-off||Secured or unsecured||Long terms – usually repaid in monthly instalments|
If it all looks very complicated, it’s not you, it’s them – business loans tend to be a bit of a headache. To make the choice easier, you can try thinking about the following:
Finding a good deal on a business loan can take quite a lot of time, mostly because in most cases providers won’t tell you their interest rates before assessing your circumstances – so you may have to make a lot of pre-applications to get a full picture of the market.
A broker, or a matching service, can thus be a good idea – especially if you don’t have a big finance team and also need advice on the most suitable type of business finance. They’ll look at your business’s finances and needs and present you with a series of options. Many offer the service for free because they make money by charging the providers they host.
However, for that same reason, you do have to be aware that in most cases, they won’t be able to look at the whole market – they can only offer you a deal with the providers they have a partnership with.
These awards recognise innovation in the areas of credit cards, loans, mortgages and BNPL. We reveal this year’s winners.
Use our business loan calculator to find out your monthly cost and total repayable amount.
See how to get a business loan as a limited company in the UK, and how much you can borrow.
Find out how to get a loan if you work for yourself, including which lenders offer business loans for sole traders.
Learn about government support and alternative options for businesses needing finance to help deal with the impact of coronavirus.
Find out if a business loan is considered income and what you can claim as a tax deduction when taking out a loan.
Businesses all over the UK face financial instability daily, which often requires outside funding. We have looked into how the state of borrowing for these businesses differs between the industry, over the years, and for the size of the business.
Get low rates, quick decisions, good customer service and plenty of flexibility through non-bank lenders.
Discover how to find the best small business loan and compare live rates and fees from a selection of lenders.
Peer-to-peer business loans aim to offer cheaper rates and an easier application process than more traditional lenders.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.