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Best Working Capital Loans

A working capital loan is imperative in financing everyday business operations. It is used to stabilize cash flow and manage business operation costs in numerous entities such as sales and marketing, wages, and product development. It is usually expected that the best working capital loans for small businesses should have considerate interest rates and terms of qualification. Hence, it is essential to compare different lenders before settling on a particular loan provider. This will give you an upper hand in determining the best loan option that will catalyze business growth.

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Compare Top Working Capital Loan Providers

Editor's Choice
Fundera
  • Loan Amount: $5K-$5M
  • Time in Business: 12+ months
  • Monthly Revenue: $10000
  • Min Credit Score: 600
View details
Key facts

Qualifications

  • Credit Score:  600+
  • Age of business:  12+ months
  • Monthly revenue:  Varies
  • US citizenship:  Required for all owners
  • Term length:  Varies

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Pros: 

  • No fee to use Fundera’s services
  • Access to 30+ reputable lenders with one application
  • Fundera does not receive incentives to work with specific lenders
  • Wide variety of lending products
  • Work directly with a lending specialist to evaluate options

Cons: 

  • High rates/fees
  • Most fees in first few months, no incentive to repay loan early
NAV
  • Loan Amount: $20K-$1M
  • Time in Business: 12+ months
  • Monthly Revenue: $21000
  • Min Credit Score: 600
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Key facts

Qualifications

  • Credit score:  600+
  • Age of business: At least 12 months
  • Monthly revenue:  Varies
  • US citizenship:  Often required
  • Loan term:  Varies by lender

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Pros:

  • Showcases business loans from more than 100 reputable lenders
  • Covers all bases with its business loan options
  • Very user-friendly offering
  • Can see what you qualify for before you apply

Cons:

  • Doesn’t provide any direct loans
  • Terms of the loan can vary widely
National Funding
  • Loan Amount: $10K-$500K
  • Time in Business: 6+ months
  • Monthly Revenue: $20000
  • Min Credit Score: 600
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Key facts

Qualifications

  • Credit Score: 600
  • Age of business:  6+ months
  • Monthly revenue:  $20,000
  • Origination fee: 0-2%

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Pros: 

  • Easy and quick online application
  • Same day approvals
  • Fast funding
  • Early payoff discounts

Cons: 

  • Rates are not available online
  • Not all loan types explicitly state requirements
  • No startups
American Express Business Blueprint™
  • Loan Amount: $2K-$250K
  • Time in Business: 12+ months
  • Monthly Revenue: $3000
  • Min Credit Score: 640
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Key facts

Qualifications

  • Credit Score:  640
  • Age of business:  12+ months
  • Average monthly revenue of at least $3,000
  • US citizenship:  Required for all owners
  • Repayment terms:  Monthly
  • Term length:  6, 12 or 18 months
  • Applicable fees: 3-9% for 6-month loans, 6-18% for 12-month loans, 9-27% for 18-month
  • *All businesses are unique and are subject to approval and review.

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Pros: 

  • Straightforward application process
  • No origination fees or prepayment penalties
  • Fair credit score requirements
  • Transparent fee structure

Cons: 

  • Majority of the fees are within the first few months, no incentive to repay loan early
OnDeck
  • Loan Amount: $5K-$250K
  • Time in Business: 12+ months
  • Monthly Revenue: $8000
  • Min Credit Score: 625
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Key facts

Qualifications

  • Credit score:  625
  • Age of business:  12+ months
  • Monthly revenue:  $8,000
  • Personal guarantee: Required
  • US citizenship:  Required, or permitted residency
  • Term length:  3-24 months

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Pros

  • Funding is quick
  • Transparent about costs and fees
  • Looser qualifications than many banks

Cons

  • Application takes a bit longer than competitors—10 minutes
  • Application requires three months of bank statements
  • 0-4% origination fees
  • Only provide info on lowest APR not highest. You would need to submit an application to find out.
  • No incentive to prepay loans since there are fixed fees
QuickBridge
  • Loan Amount: $10K-$500K
  • Time in Business: 6+ months
  • Monthly Revenue: $21000
  • Min Credit Score: 580
View details
Key facts
  • Discounts of up to 6% available for early repayments
  • An easy and quick application process
  • Approved applications receive funds within 2 days

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Pros

  • Quick funding available
  • Easy application process
  • Early repayment discounts
  • Limited restrictions on the use of funds

Cons

  • No website visibility on fees or loan terms until after the hard credit pull
  • Origination fee charged
  • The $250,000 annual revenue requirement will exclude many small businesses
BusinessLoans.com
  • Loan Amount: $5K-$3M
  • Time in Business: 6+ months
  • Monthly Revenue: $20000
  • Min Credit Score: 500
View details
Key facts
  • Multiple types of funding, nationwide
  • Get help from a loan representative
  • Highly rated customer support

Read Review »

Pros

  • Easy way to compare business loans from over 35 lenders
  • Partners with large, established lenders such as Bluevine, OnDeck, and Funding Circle
  • Loan decisions are made quickly after an easy application process

Cons

  • No transparency of loan terms readily available
  • Loan funding can take up to one week, which is longer than competitors
  • Collateral is required from some of BusinessLoans.com’s lending partners

What Is a Working Capital Loan?

A working capital loan is a type of financing that is used to facilitate day-to-day business activities. Most business owners use working capital loans to cover payrolls, debt payments, restoking inventory, paying rent, to name a few. This is essential in bridging financial gaps which reciprocate greater business success. Working capital loans are available in conventional financial systems such as banks, credit unions, and also online lenders.

As opposed to real estate loans and other types of long-term loan financing, working capital loans are small terms that have comparatively lower annual percentage rates. They have rates that can range between 3% to 99% based on the lending company. In addition, qualification thresholds are lenient compared to long-term loans, more so when acquired via online lenders. Online lenders may provide the best working capital loans to customers with extremely low credit scores.

Working capital loans are referred to as demand loans. They are issued in a lump sum, and the lender may request payment at any time. This financing also requires collateral, mostly as the company’s assets. Repayment is scheduled based on the customer’s potential to repay the loan and the terms used to secure the loan. For instance, if land or any other substantial asset was utilized in acquiring the loan, one can face favorable interest rates and longer payment duration.

Common Reasons for a Working Capital Loan

Financial hurdles may be quite hauling when one is seeking elevated profit margins. Working capital financing can provide adequate funds to execute day-to-day activities. Below is a discussion that articulates key reasons for getting working capital financing:

Coping Up with High Season Sales

Most companies do not have stable revenue all year long. During seasons such as Christmas, sales are normally at peak levels. Thus, the sellers with the proper amount of goods get to enjoy impeccable minting. Acquiring a working capital loan can ensure that one matches the competition by restocking inventory.

Covering Production Costs

During the production period, more funds are spent than gained. In this spell, most business owners may face financial complications which may require intervention from the best small business working capital loans.

Paying Invoices

After picking up goods, one may face financial challenges when repaying the amount due. Additionally, some distributors may demand prompt payment, which may require alternative financing from working capital loans.

Solving Urgent Business Bills

Urgent business bills such as paying rent or covering payroll may require mediation from a business capital loan. This is because they are short-term financing options that aid in bridging everyday financial gaps.

Types of Working Capital Loans

There are numerous types of working capital loans that may suit various business needs, as articulated below:

Term Loans

Though term loans can be used for business expansion, they also serve as short-term working capital loans. Borrowers are provided with cash upfront that is designated to be paid in fixed segments over a certain duration. Term loans have working capital loan interest rates of between 6% to 99%, and the loan amounts range from $2,000 to $5 million.

Business Lines of Credit

Business lines of credit have favorable working capital loan terms, which makes them more flexible than term loans. Customers can access cash up to a credit limit, and interest is paid on borrowed funds only. Limits range between $2,000 to $250,000 and have annual percentage rates of 10% to 99%.

SBA Loans

SBA loans are initiated by the U.S Small Business Administration and are available in banks, credit unions, and online lenders. They are intended to start, maintain, and grow businesses where borrowers can access up to $5 million and are available in different programs. Each program has distinct loan amounts, terms, and rates and is projected to serve different financial roles. 

Invoice Factoring

Unpaid invoices can be great assets that can be used to obtain business capital loans. Most lenders require a portion of between 85% to 95% of the outstanding balance. The lender purchases the invoices at an upfront fee and collects payments when the invoice is fulfilled. The borrower receives the remainder minus any fees that were part of the consensus. Invoice factoring is a quick way to acquire funds and evade the hectic process of obtaining a loan from a traditional financing institution. 

How To Get a Working Capital Loan

The application of a working capital loan highly depends on the type of loan and lending institution. Below is a detailed discussion of how to get working capital.

Assessing the borrowing needs

Getting a loan without evaluating the borrowing needs may cause mismanagement of funds. One is advised to check whether the business is anticipated to benefit from the loan. It would also be best to evaluate whether the loan will be repaid during the designated period. This can be determined by checking the monthly payments to determine if the loan will leave positive remarks rather than adding complications to the business. 

Evaluate the business and personal credit score

Personal and business status are essential when applying for a working capital loan. Lenders check both the business and personal credit scores to evaluate whether one is worth the funding. It is advisable that one checks their credit score in advance to gauge their qualification odds. A credit score of 530 can allow borrowers to qualify for a working capital loan. However, the best business capital loans require a credit score of 600 and above. They also come along with considerate rates and terms.

Research and analyze lenders

Research is imperative in numerous aspects of financing, and working capital loans follow suit. After determining the loan amount that one requires, examining several lenders will help in outweighing the best. This is because different lenders have different terms, rates, and qualification thresholds. In addition, research helps one gauge whether they will dwell on a bank, credit union, or online lenders in regard to their needs. It also reveals a company’s reputation based on customer reviews. 

Garner necessary documents

Different lenders may require specific documentation based on their operation criteria. The most common documentation required by most lenders is information about the business, financial statements for at least one year, and tax returns for a stated duration. Some lenders may require the submission of a business plan, particularly for a startup.

Submit a formal loan application

After filling the loan application, one should submit it to the lender’s website or their brick-and-mortar location. There are various procedures that lenders use to source out missing formation, such as phone or email. This is vital in ensuring that the application is complete for vetting. Most lenders allow borrowers to check their progress online.

FAQs

What kind of credit score is needed for a working capital loan?

How do I find a lender that will approve me for a working capital loan?

What determines the down payment amount in a working capital loan?

What types of working capital loans exist?

What is a reasonable interest rate for a working capital loan?