Small Business Working Capital Loan Options [2020]

Working capital is the fuel your business uses to conduct everyday operations and take things to the next level. However, according to Goldman Sachs, access to working capital is the most difficult challenge that businesses face. That’s where having working capital loan options comes in handy.

To order ingredients for customers, restaurants spend working capital. To purchase inventory, retailers use working capital. In order to purchase supplies, machinery, and pay employees, construction companies need working capital.

When you don’t have the revenue to cover these expenses, you might think outside the box and consider working capital loan options.

working capital loan options

What is a Working Capital Loan?

A small business working capital loan gives your business the cash you need to operate. 

In some cases, you might investigate your working capital loan options to get extra cash before the busy season. On the other hand, working capital can also help you get through a slow season where you’ll generate less revenue. Working capital for small businesses simplifies operations under normal circumstances, too.

Because the purpose of working capital is to help you generate revenue, working capital loan options generally have shorter terms. While this can put stress on your business to repay the loan quickly, it can also be to your advantage. Even at the same interest rate, longer terms generally involve higher payments.

These are some of the ways that businesses generally spend working capital:

  • Payroll
  • Rent
  • Operating costs
  • Seasonal cash flow gaps
  • Inventory
  • Supplies
  • Marketing
  • Growth and expansion
  • Cash flow shortages

However, this can vary based on your business.

How to Get a Working Capital Loan

If you’re confused about how to get working capital for your small business, you’re not alone. Working capital loans are available through different types of lenders, each with unique processes.

Banks have the lowest rates, but also the longest and most complicated process. Gathering information to apply can take weeks, and you may not receive an offer or rejection for months. If you can qualify and wait, though, then this may be your best option.

Alternative lenders generally have an easier and faster process for getting a loan. After filling out a short form with a few important details about your business, you can learn the rates, terms and amounts you qualify for. Through most online lenders, you can have cash deposited in your account in just a few hours.

That being said, not all working capital loan options are created equal.

Working Capital Loan Options & Product Types

When your revenue doesn’t cover your expenses, you may need to find capital elsewhere. Depending on your needs, there are a number of working capital loan options that you should consider. 

Short Term Loans (Small Business Loans)

This is one of the most common working capital loans for small businesses. Small business loans, also called term loans, give you a set amount of cash that you pay back over a defined term at a certain interest rate. The specifics will vary based on your business.

Because the payment terms are shorter, this working capital loan option is best when you’re utilizing funding to generate higher revenue.

Business Line of Credit

It’s not uncommon for business owners to take a leap of faith and grow, without knowing exactly what expenses await ahead. When flexibility is the name of the game, business lines of credit are the best choice. 

This working capital loan (which isn’t technically a loan, but a financing option) gives you an approval for a set amount of cash. As you encounter new expenses, you can draw more. Revolving lines of credit give you renewed access to cash as you pay the balance down.

Crucially, business lines of credit also give you a lifeline for potential cash flow shortages down the line.

Merchant Cash Advances

Merchant cash advances also aren’t classified as loans, but they do give you access to working capital. You’ll receive a cash advance in exchange for future credit card sales. Rather than making payments, the lender will automatically take a percentage of cash.

Accounts Receivable Financing

Accounts receivable financing is a working capital loan option that turns your receivables (which haven’t yet been paid) into cash. You can sell invoices to get funded immediately, and your customers will never know. Instead of waiting for customer payments, you can take on new clients right away. 

SBA Loans

While SBA loans aren’t technically considered working capital loans, as they’re known for having longer terms, they’re a great option for businesses seeking substantial amounts. Keep in mind, though, that SBA loans also mean a longer application and approval process. 

What Are the Interest Rates for Working Capital Loan Options?

There’s no short answer when it comes to predicting working capital loan interest rates. This number can depend on a number of factors, including your revenue, credit score, and the state of the economy. 

For some working capital loans, interest rates may be on the lower end—just above prime. For others, the average rates may be a bit higher. However, even higher rates can still help businesses unlock new opportunities. At the end of the day, this may make it profitable.

Overall, having higher revenue and credit can help you obtain lower rates.

Learn Your Working Capital Loan Options Fast

Learning what you qualify for doesn’t have to mean filling out dozens of applications.

At National, we streamline the process by helping you find the best rates within our 75+ lender marketplace. Then, we can help you explore your fast working capital loan options. You can learn your options in minutes and get funded in just a few hours!

Apply now to get started!

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!

About the Author, Matt Carrigan

Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!


Dislcaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.