Working Capital Loans for Small Businesses
Get fast and easy access to working capital to propel your everyday business activities.
Ready To Move Your Business Forward?
What is a Working Capital Loan?
A short-term loan that is used to finance day-to-day business operations such as managing payroll, stocking inventory, manufacturing products, paying debts, and so on can be termed a business working capital loan.
A working capital loan can only be used to cover everyday business expenses, and cannot be utilized towards funding real estate purchases or investing in long-term assets.
How a Working Capital Loan Can Work for You
Working capital loans for small business help cover day-to-day expenses if your business is lacking cash flow or in need of extra funds to expand. Designed for short-term business needs, a working capital loan helps you sustain business activities on a daily basis to help you plan for long-term success.
Having cash on hand helps cover the everyday fluctuations of your business and provides peace of mind when businesses experience cash flow gaps or have unexpected expenses. Unpredictable revenue streams, seasonal sales lulls, or equipment breakdowns can all cause disruptions in working capital. Alternatively, increases in demand or opportunities for expansion can be reasons for increasing your cash reserves to plan for your business’s long-term success. Here are some ways in which working capital loans can help your small business:
Hire More Staff
- Hire new employees to support your business growth
- Make sure payroll is covered so your workers are paid on time
Finance Equipment
- Replace outdated equipment with newer models for your business
- Cover the cost of equipment maintenance or repairs
Add Inventory
- Introduce new items, product lines, or services to drive revenue for your business
- Stock more best-selling items during your peak sales seasons
Manage Cash Flow
- Maintain daily operations even through gaps in cash flow
- Continue running your business seamlessly during seasonal lulls
How to Get a Working Capital Loan
The first step towards getting a business working capital loan is to understand your company’s short-term business capital needs. You must figure out if you need money to hire skilled employees, or manage existing debt, or pay vendors for inventory.
The next step is to research lenders that specialize in working capital loans for small businesses. Understand what are loan qualification criteria and loan application process of each lender. Most banks, traditional lenders, as well as alternative lenders might require you to put down collateral to secure the loan. If you are just starting your business, or have a poor credit score, you might have to look for lenders that specialize in bad credit loans.
Gather all your financial & business documents such as income tax returns, business income statement, business plan, and other such reports. When you submit the loan application, don’t forget to attach all these financial documents for lender’s assessment.
Once the lender approves your working capital loan application, read the terms and conditions of the loan before accepting the loan. Compare the interest rate, loan duration, and repayment frequency with other lenders in the market. Don’t hesitate to negotiate on loan terms if the lender is flexible.
How to Apply
How Does a Working Capital Loan Work?
When business owners apply for a business capital loan, the lender examines their personal & business credit score along with their financial statements. Based on the lender's loan qualification criteria, the application can be approved or rejected.
Once the application is approved and the loan terms are laid out, the business receives the working capital loan either as a lump sum amount or a revolving credit depending on the lender. Remember that working capital loans are essentially short term loans so they need to be repaid within 12 to 18 months in general (depending on the loan agreement). The payment frequency can be daily or weekly as per terms printed on the loan document.
Here’s how working capital loans work with National Funding:
Fast & Easy Application Process
No-cost, no-obligation application with funding in as few as 24 hours1
Helpful Loan Guidance
A Funding Specialist will contact you to help you choose the right business financing option.
Quick Decision, Fast Funding
You could be approved, and funds deposited into your account, in as little as 24 hours.1
When Should Your Business Consider Working Capital Loans?
In general, a small business owner seeks working capital loans when they are short of cash flow and struggling to keep the business running on a daily basis. To know if your business needs a working capital loan, you must first calculate the company’s working capital on hand.
Calculating Working Capital & Working Capital Ratio
You can find your business’ working capital by deducting the current liabilities from current assets.
Working Capital = Current Assets - Current Liabilities
Current Assets include cash on hand, accounts receivable, short term investments, inventories, and so on. On the other hand, current liabilities include existing debt, account payable, employee wages, and income tax owed. If your working capital is too little or in negative, your business could definitely use a cash flow boost with a working capital loan.
Another way to comprehend if you need working capital loan is by calculating the working capital ratio.
Working Capital Ratio = Current Assets ÷ Current Liabilities
If your working capital ratio is equal to 1 or less than 1, it indicates the lack of cash flow, which can be resolved through a working capital loan.
Types of Business Loans
Depending on the lender you choose to work with, you might get three types of working capital loans.
SBA Loans
SBA 7(a) loans can be used as working capital loans. Backed by U.S. Small Business Administration, these loans tend to have lower interest rate, strict qualification criteria, and moderate approval rates compared to other types of business capital loans.
Short Term Loans
Most traditional and alternative lenders offer short-term loans for businesses in need of working capital. These loans tend to have higher approval and interest rates and might require business collateral. Alternative lenders like National Funding are quick with their loan approval process, offering funds within 1 or 2 days.
Business Line of Credit
Some lenders offer a business line of credit that can be utilized for working capital by businesses. This type of loan involves a revolving credit where you can draw funds as and when you need from the set limit of loan amount available to your business
What are the Benefits of Working Capital Loans?
A working capital loan provides a quick and easy way to achieve your business goals. If your business needs access to business funding for short-term or long-term planning, a working capital loan can help you get there. Working capital helps cover financial shortcomings until business can stabilize and gives access to funds for critical payments to maintain regular operations. Working capital loans can be customized to your unique business needs. With experience in almost every industry, National Funding provides highly tailored financing solutions to meet your specific business goals.
Be Better Prepared for the Future with More Capital
While the saying may be ‘business isn’t personal,’ we know small business owners take pride in their companies, and that business truly is personal.
Small business working capital loans could make all the difference in the success of your company, and we want to help. Cash reserves make businesses better equipped to manage growth opportunities and see long-term success. A lack of cash flow can lead to late payments, decreased credit scores, and higher interest rates on future business loans. But with a working capital loan, your business can cover cash shortages and stay afloat during sales slumps. Don't miss out on critical payments like payroll or inventory orders – prepare for the here-and-now by acquiring access to funds for your business.
Maintain Ownership of Your Business
Working capital business loans allow you to maintain control of your business. Traditional equity investors typically require a percentage of your business in exchange for funding. Business owners are often reluctant to give up a portion of ownership for a company they’re passionate about, which is why we partner with small businesses to get them access to critical funding without giving up a portion of their business. Small business loans give business owners access to capital without losing ownership so your business can continue to grow and thrive with your vision for success.
Working Capital Loans With No Collateral Required
Some small business working capital loans require collateral of some sort, but we provide working capital with a personal guarantee and without requiring collateral. When applying for a working capital loan, we look at the current status of your business which helps us determine the loan amount that suits your business.
Provides Financial Flexibility
A working capital loan can be used how you personally see fit for your business. Working capital loans can be used for paying employees, purchasing equipment, paying bills, and more. No matter the financial needs, receiving a working capital loans for your company allows financial flexibility to help you with your business needs.
What Customers Are Saying
Cheryl Dailey, Owner
Master Handyman, LLC
Focusing its business on providing handyman services to commercial enterprises in Cleveland, Master Handyman looked to secure a working capital loan to cover key expenses and allow them to hire new staff to foster growth. They wanted “real employees, not just day laborers”, and working with National Funding gave them the cash resource they needed to make it happen.
Craig Hart, Owner
Smyth Electrical Services
As the business entered a period of expansion, having the reliability of available cash was critical to alleviating the stresses that growth can cause. Being able to rely on National Funding’s small business loans was the peace of mind that help the head of this small business rest easy.
Why National Funding?
We have experience helping a wide variety of business owners secure the right financing solution — funding for any company
We Know Your Industry
We have experience helping a wide variety of business owners secure the right financing solution
Fast & Easy Application Process
No-cost, no-obligation application with funding in as few as 24 hours1
Trusted by Businesses Like Yours
Over $4.5 billion in funding to more than 75,000 businesses nationwide
Funding Specialists Who Care
Experienced Funding Specialists help you make the right decision
High Approval Rates
Even if you’ve been turned down elsewhere, there’s still a great chance we can get you the business capital.
Hassle-Free Payments
We provide fixed terms and set up simple, automatic payments3
We Know Your Industry
We have experience helping a wide variety of business owners secure the right financing solution
Fast & Easy Application Process
No-cost, no-obligation application with funding in as few as 24 hours1
Trusted by Businesses Like Yours
Over $4.5 billion in funding to more than 75,000 businesses nationwide
Funding Specialists Who Care
Experienced Funding Specialists help you make the right decision
High Approval Rates
Even if you’ve been turned down elsewhere, there’s still a great chance we can get you the business capital.
Hassle-Free Payments
We provide fixed terms and set up simple, automatic payments3
Working Capital Loans Resources
What Is a Working Capital Loan?
A working capital loan adds to the money you have on hand for your business’ daily needs. Funds from a working capital loan can go toward things like payroll, rent, inventory, etc. Sometimes, you’re waiting for receivables and suddenly money is tight, and a personal business loan may be a good solution. Check out this blog on the ins and outs of loans for cash reserves. With business financing, you can make your money work for you, and not the other way around.
Business Cash Reserves: How It Can Fuel Operations and Growth
There's a lot to consider when deciding how to use business funds for your company. You need cash to keep your business running and pay vendors. However, it's also important to look at the future of your business and think about investing in potential growth opportunities. By knowing how you wish to use business capital, you can begin to calculate how much you might need to reach your business goals. This article can help you learn how to determine your working capital needs.
Frequently Asked Questions
Finding the cash your business needs to pay bills or take on the competition isn't always straightforward. Like most business owners, you probably have questions about loans and financing options. We put together some of the most common questions about working capital loans to help you get the answers you need.