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Best Working Capital Loans for 2021

Online lenders offer working capital loans to finance short-term business expenses.
Steve NicastroJanuary 4, 2021
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Working capital loans are short-term financing that can help your business cover operational costs, such as rent, payroll or restocking inventory. The loans carry short repayment terms and are not typically used for long-term investments, such as real estate or equipment.
Banks offer the lowest annual percentage rates on working capital loans, but they also have tougher credit score and revenue requirements than online lenders. If you don’t qualify for a bank loan or if you need fast working capital, you can turn to online lenders for small-business loans.

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Our pick for

Working capital for everyday needs

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OnDeck - Online term loan

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Est. APR

9.00 - 99.00%

Min. Credit Score

600

OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.

Pros

  • Cash can be available within the same business day.
  • Requires low minimum credit score.
  • Less paperwork than most lenders.

Cons

  • Fixed-fee structure means early repayment will not save interest.
  • Requires frequent (daily or weekly) repayments.
  • Requires business lien and personal guarantee.
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Qualifications:

  • Minimum credit score: 600.
  • Minimum time in business: 1 year.
  • Minimum annual revenue: $100,000.
  • No bankruptcies in the past 2 years.

Our pick for

Working capital for large purchases

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Credibility Capital - Online term loan

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Est. APR

6.99 - 24.99%

Min. Credit Score

650

Credibility Capital offers low-cost business loans that work best for small-business owners with strong credit.

Pros

  • Competitive rates among online lenders.
  • No prepayment penalty.
  • Extra monthly payments can save interest cost.

Cons

  • Requires high minimum credit score and revenue.
  • Requires business lien and may require personal guarantee.
  • Not available in Nevada, North Dakota, South Dakota or Vermont.
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Qualifications:

  • Minimum credit score: 650.
  • Minimum time in business: 2 years.
  • Minimum annual revenue: $200,000.
  • No bankruptcies in the past 5 years.

Our pick for

Working capital for unpaid customer invoices

Companies that work in the business-to-business sector will face gaps in cash flow. To help keep your business running while the check’s in the mail, consider invoice factoring or invoice financing.

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BlueVine - Invoice factoring

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Est. APR

15.00 - 68.00%

Min. Credit Score

530

BlueVine's invoice factoring can turn unpaid customer invoices into fast cash.

Pros

  • Finances larger invoices.
  • Cash can be available within the same day.
  • Accepts low minimum credit score and short time in business.

Cons

  • Not for businesses that do not invoice on net terms.
  • Loan amount is tied to the value of your invoices.
  • Dependency on customers to pay their bills on time.
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Qualifications:

  • Minimum credit score: 530.
  • Minimum time in business: 3 months.
  • Minimum annual revenue: $120,000.

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Summary of Best Working Capital Loans for 2021

LenderBest ForEst. APRMin. Credit ScoreNext Steps

OnDeck - Online term loan

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Best for Working capital for everyday needs9.00 - 99.00%600
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Credibility Capital - Online term loan

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Best for Working capital for large purchases6.99 - 24.99%650
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BlueVine - Invoice factoring

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Best for Working capital for unpaid customer invoices15.00 - 68.00%530
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How to get a working capital loan

Working capital loans are available from a variety of sources, including online lenders, banks and credit unions. Banks and credit unions are options for established businesses with collateral and strong credit, while online lenders may provide options for borrowers with spotty credit histories.
Online or alternative lenders will typically charge higher APRs than banks and credit unions.

When is a working capital loan a good idea?

Working capital financing may be a smart move when your business needs cash to cover day-to-day operational expenses. The loans can provide a lifeline for seasonal businesses that experience a dip in sales, like landscapers, ski resorts and retailers.
This is a short-term loan to solve a temporary slowdown, so it isn't the best solution for business expansion or financing a long-term investment. If you need to borrow for those reasons, consider a long-term business loan instead.

Types of working capital loans

Term loans: While term loans are commonly used for financing an expansion, they can also be used for short-term working capital. Term loans provide a sum of cash upfront that is repaid over a set period of time with fixed, equal payments.
Business lines of credit: A line of credit provides more flexibility than term loans, as you get access to funds up to a credit limit and only pay interest on what you’ve borrowed. You can draw and repay funds as often as you’d like, as long as you make payments and don’t exceed your limit.
SBA loans: These loans are guaranteed by the U.S. Small Business Administration and issued through participating banks, credit unions and online lenders. SBA loans provide up to $5 million for working capital, expansion or equipment purchases.
Invoice factoring: If you have customers with unpaid invoices, this type of financing lets you turn the invoices into fast working capital. The factoring company buys your invoices for an upfront payment (minus a fee), and it gets paid when it collects from your customer.
» MORE: Compare business loan options

Compare small-business loans

When looking for a working capital loan, it’s important to compare all of your options based on APR, which represents the true cost of the loan, including all fees.
Evaluate other loans using NerdWallet’s small-business loan tool. NerdWallet’s list of lenders is based on factors including market scope, customer experience and lender trustworthiness.
Last updated on January 4, 2021

To recap our selections...

Best Working Capital Loans for 2021

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