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Compare Working Capital Loans

December 2022
Results for - December 2022

We help businesses like yours find the right type of funding, no matter the situation. If you are looking for financing for your everyday operations, a working capital loan might be right for you. Read our reviews and compare the providers below, and get started today.

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Working Capital Loan Explained

A working capital loan is a type of business financing meant to cover a business’s everyday operations. These loans aren’t meant for long-term business expenses or investments. They are for providing working capital for a specified period to cover a business’s short-term operational expenses.

Working capital loans are typically secured with collateral of some form. Borrowers with good credit and strong financials can sometimes get an unsecured loan.

The term “working capital” refers specifically to the operating liquidity available to a business or other organization. Working capital is considered, alongside fixed assets, as a part of an institution’s operating capital. As such, the “working capital” in working capital loans will have different rules than similar kinds of loans.

In simpler terms, working capital is the capital a business uses in day-to-day operations. It can be calculated by subtracting your current liabilities from your current assets.

Working capital loans come in several types, including:

  • Short-term loans
  • Invoice financing
  • Merchant cash advances
  • Lines of credit

Top 3 recommended Working Capital Loan Providers

If you’re looking for working capital loan providers, try checking out these lenders:

How Is A Working Capital Loan Different From A Business Loan?

While the term “business loan” applies to multiple loan arrangements, it’s not applicable to Working Capital Loans. In short, working capital loans are a specific type of business financing that’s typically used to cover costs like rent, payroll, and other debt payments.


In some ways, working capital loans resemble business loans. Both types of loans are used strictly for business purposes. Both types of loans are also applied for and acquired similarly. The similarities between business loans and working capital loans stop there, however.


Working capital loans are used differently than business loans. Companies also apply for working capital loans for a different reason than they would business loans. Furthermore, a business loan can cover ongoing expenses, invoices, new vehicles, software updates, and so on. A working capital loan, on the other hand, would only be applied for by and given to a company that has an issue such as too much reliance on seasonal or cyclical sales.

This is where working capital loans can shine. Some kinds of businesses are very busy in the summer, but winter will see their productivity cut by more than half. During these slower seasons, a business would draw from a working capital loan to keep up with expenses during periods of reduced business activity.


How To Apply For A Working Capital Loan

Applying for a working capital loan is easy, but securing a good one won’t be easy unless your credit score and financials are strong. Each bank or lender will have its own specific requirements for factors such as credit scores. That being said, they’ll all have some requirements in common.

When you’re applying for a working capital loan, you’ll need to bring:

  • Personal ID
  • Business registration documents
  • Tax returns for the last three years
  • Audited balance sheets for the last three years
  • A bank statement
  • Proof of residential address
  • Proof of business address
  • PAN card
  • Whatever your chosen lender requires

So, first, you’ll have to choose your lender. To start, you’ll have to consider your credit score and the age and health of your business. If you don’t meet a specific lender’s requirements, there’s not much you can do about that in the short term.

Among the lenders who’ll take you, there are a few things to consider. First, what will the loan be used for? The longer you’ll be keeping your working capital loan, the more you’re going to need to pay attention to its Annual Percentage Rate (APR). A loan’s APR is separate from its interest rate, and APRs are the factor that gets to people who have trouble paying off a loan. Other factors to consider are the interest rate and the length of the loan, which you’ll choose according to your unique requirements.

Working Capital Loan Types

Short-Term Loans

Your typical working capital loan will be a short-term loan to cover your working capital expenses.

Invoice Financing

Invoice financing involves lending money to pay for invoices specifically. Short-term invoice financing is great for the lender because you can use your inventory as collateral to secure the loan.

Merchant Cash Advances

Merchant cash advances come at a high cost, but they’re always an option.

Lines Of Credit

Finally, many working capital lines of credit are also available. These lines of credit allow you to draw funds for short-term expenses when you need to. Because of this, you have a lot of control over how much you borrow and for what specific purpose.

After you know what you’re trying to get out of a working capital loan and your paperwork is in order, it’s time to take it to a lender.

Choosing The Right Working Capital Loan Provider

When you’re looking for a good working capital lender, there are a few key things to watch out for. First of all, find and compare many lenders’ APRs. If a lender’s APR is over 17%, you can expect a world of trouble if anything goes wrong. Make sure you get the best deal you can with your credit score and current business financials, otherwise you’re leaving money on the table.

Another factor to consider is the interest rate on the loan. This factor is a simpler one to understand, as it’s just the cost you pay each year to borrow money. Lower interest rates are of course better.

The lender’s customer service reputation is also quite important. Bad lenders can be an absolute nightmare and they’re excellent at making your life a living hell if you’re not making complete, timely payments. It’s important to have a reputable lender that you can trust enough to answer your questions and concerns professionally, with as little sidetracking as possible.

A good lender of any type of loan will be open and confident about their interest rates, APR, payment schedule, their application process, and their history. A quick search with the Better Business Bureau or the US Federal Trade Commission can eliminate many lenders with a history of negligent or predatory lending practices.

What To Avoid With A Working Capital Loan

There are several red flags to watch out for when you’re looking for a working capital loan. The first is a high APR. According to consolidatedcredit.org, the average credit card APR is about 16%. This is around the right metric for when APRs start to get out of control. When an APR reaches 16% or 17% or even higher, the math of the loan is completely against you.

As mentioned, there are also many lenders, including working capital lenders, with poor reputations due to poor lending practices. If you can find an accredited lender on the Better Business Bureau and they have very bad ratings and many complaints, steer clear of them. There are several other regulatory bodies you can check with, including the Federal Trade Commission.

Final Word

Working capital loans are an excellent tool for businesses temporarily or cyclically struggling with everyday expenses. If you’re diligent in your choice of lender and honest with yourself about the purpose of the loan, working capital loans have much to offer you.