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Working Capital Line of Credit: What It Is and Best Options

By Randa Kriss
Last updated on November 2, 2023
Edited bySally Lauckner
Fact checked and reviewed

⏰ Estimated read time: 6 minutes

A working capital line of credit is a good option to get cash as needed for operating expenses, seasonal slowdowns and to bridge cash flow gaps.

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A working capital line of credit is a type of short-term financing that’s used to cover a business’s operating expenses, such as rent, payroll or inventory. These small-business loans are not used to fund large investments, like opening a new location or purchasing real estate.
Working capital lines of credit are available from a wide range of lenders and can be particularly useful for businesses that experience cash flow gaps or seasonal slows.
Below, compare some of the best options and learn more about how these credit lines work.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are 6 working capital line of credit

LenderNerdWallet RatingMax loan amountMin. credit scoreNext steps

SBA 7(a) loan

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Best for SBA working capital lines of credit

$5,000,000650

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Wells Fargo Small Business Advantage® Line of Credit

5.0/5

Best for Bank working capital lines of credit

$50,000680
Read Review

Fundbox - Line of credit

5.0/5

Best for Working capital lines of credit for startups

$150,000600
Read Review

OnDeck - Line of credit

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5.0/5

Best for Unsecured working capital lines of credit

$100,000625

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Headway Capital - Line of credit

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5.0/5

Best for Working capital lines of credit for bad credit

$100,000625

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Chase - Business line of credit

Best for High-limit working capital lines of credit

$500,000700
Read Review

Here are 6 working capital line of credit

Best for SBA working capital lines of credit

U.S. Small Business Administration

Max Amount

$5,000,000

Min. Credit Score

650

Best for Bank working capital lines of credit

Wells Fargo

Max Amount

$50,000

Min. Credit Score

680

Best for Working capital lines of credit for startups

Fundbox

Max Amount

$150,000

Min. Credit Score

600

Best for Unsecured working capital lines of credit

OnDeck

Max Amount

$100,000

Min. Credit Score

625

Best for Working capital lines of credit for bad credit

Headway Capital

Max Amount

$100,000

Min. Credit Score

625

Best for High-limit working capital lines of credit

Chase

Max Amount

$500,000

Min. Credit Score

700

I'M INTERESTED IN:

Our pick for

SBA working capital lines of credit

Part of the 7(a) loan program, SBA CAPLines provide funding for short-term working capital needs. Each of the four credit lines is designed for a specific purpose, including general working capital, seasonal slows, construction and contract orders.

SBA 7(a) loan

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Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
11.50-15.00%
7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Lowest interest rate

Max loan

$5,000,000

Min. Credit score

650

Apr range

11.50-15.00%

7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Read Review

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Our pick for

Bank working capital lines of credit

Wells Fargo offers a revolving working capital line of credit in amounts up to $50,000. You may be able to qualify with less than two years in business — as long as you have good credit.

Wells Fargo Small Business Advantage® Line of Credit

Max Loan Amount
$50,000
Min. credit score
680
Est. APR
13.00-15.00%
Wells Fargo offers an unsecured line of credit that’s designed for borrowers with less than two years in business.

Max loan

$50,000

Min. Credit score

680

Apr range

13.00-15.00%

Wells Fargo offers an unsecured line of credit that’s designed for borrowers with less than two years in business.

Our pick for

Working capital lines of credit for startups

You can get a business line of credit from Fundbox in amounts up to $150,000. This revolving credit line can be used for a range of short-term purposes — and you may be able to qualify with just six months in business.

Fundbox - Line of credit

Max Loan Amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.
May fund quickly

Max loan

$150,000

Min. Credit score

600

Apr range

36.00-99.00%

Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.

Our pick for

Unsecured working capital lines of credit

There is no physical collateral required to access a working capital line of credit from OnDeck. The lender will take out a general lien on your business assets and ask you to sign a personal guarantee.

OnDeck - Line of credit

Read Review

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Max Loan Amount
$100,000
Min. credit score
625
Est. APR
39.90-77.90%
OnDeck offers a fast line of credit for small-business owners with less-than-stellar credit who need to manage cash flow or buy inventory.
May fund quickly

Max loan

$100,000

Min. Credit score

625

Apr range

39.90-77.90%

OnDeck offers a fast line of credit for small-business owners with less-than-stellar credit who need to manage cash flow or buy inventory.
Read Review

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Our pick for

Working capital lines of credit for bad credit

Headway Capital provides fast working capital lines of credit for borrowers with a minimum credit score of 600 or higher. You can qualify within minutes and receive funds as soon as the next business day.

Headway Capital - Line of credit

Read Review

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Max Loan Amount
$100,000
Min. credit score
625
Est. APR
35.00-80.00%
Headway Capital offers a fast and flexible line of credit for borrowers who may not qualify for more traditional options.

Max loan

$100,000

Min. Credit score

625

Apr range

35.00-80.00%

Headway Capital offers a fast and flexible line of credit for borrowers who may not qualify for more traditional options.
Read Review

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Our pick for

High-limit working capital lines of credit

Chase offers a credit line up to $500,000 that allows you to withdraw funds as needed, but you’ll typically need strong credit and at least two years in business to qualify.

Chase - Business line of credit

Max Loan Amount
$500,000
Min. credit score
700
Chase offers a revolving credit line that allows you to withdraw funds as needed, but you’ll typically need strong credit and at least two years in business.

Max loan

$500,000

Min. Credit score

700

Chase offers a revolving credit line that allows you to withdraw funds as needed, but you’ll typically need strong credit and at least two years in business.

How Much Do You Need?

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What is a working capital line of credit?

A working capital line of credit is used specifically to finance short-term operating expenses, as opposed to investing in one purchase or long-term project. You might use this business line of credit to pay for rent, payroll, utilities, inventory, supplies, emergency expenses, employee training or large order fulfillments.

What is working capital?

Working capital is the difference between your business’s current assets (cash, accounts receivable, inventory) and its current liabilities (accounts payable and debts). This metric provides an evaluation of your business’s short-term financial health and refers to the capital that you have available to spend on day-to-day expenses.

How a working capital line of credit works

A working capital line of credit allows you to borrow up to a certain limit and pay interest only on the funds you draw.
You then repay the money you’ve borrowed, usually weekly or monthly. You can continue to draw on the line as needed — provided you make timely payments and don’t exceed your credit limit.
Working capital credit lines can be secured or unsecured. Secured business lines of credit are backed by physical collateral, like inventory or equipment, whereas unsecured lines don’t require physical collateral.

Working capital loan vs. line of credit

The main distinction between working capital loans and working capital lines of credit is the way that they’re structured. Whereas a credit line offers a specific amount of funds that you can draw from as needed, a working capital loan provides a lump sum of cash upfront that you repay over a set period of time.
As a result, you may find some working capital loans — especially those issued by online lenders — offer larger funding amounts and longer repayment terms compared with line of credit options. Ultimately, however, available financing varies largely based on the lender and your qualifications.

Pros and cons of working capital lines of credit

Pros

  • Flexible use. You can use a working capital line of credit for a wide variety of purposes, including paying rent, buying inventory or covering emergency expenses. These products are an ideal short-term financing option for bridging cash flow gaps, especially during seasonal changes.
  • Revolving structure. Most working capital lines of credit are revolving which is different from a business term loan. You can draw from your credit line whenever you need access to funds and pay interest only on the money you borrow. And as long as you make your payments on time, you can continue to draw on the line, up to your limit
  • Can be quick to fund. Some online lenders can provide capital in as little as 24 hours, and most can within a few business days. Traditional lenders, like banks and credit unions, are typically slower to fund.

Cons

  • Can be expensive. Annual percentage rates (APRs) on working capital lines of credit can vary greatly — ranging from 10% to 80%. Depending on the lender, you may also face origination fees, account maintenance fees, draw fees or other additional charges. Although online lenders are fast to fund, they’re likely to charge higher rates as a result. Traditional lenders are more likely to offer the most competitive interest rates and terms.
  • May have frequent payments. As a type of short-term financing, working capital lines of credit might require more frequent payments than some other business loan options. Although bank and SBA lenders may offer monthly payments, many online lenders will require a weekly repayment schedule.

How to get a working capital line of credit

Working capital lines of credit can be issued by banks, credit unions and online lenders. In addition to offering their own lines of credit, some banks and credit unions also offer SBA programs such as SBA CAPLines which can help you meet your short-term financing needs.
Here’s what you can do to find the right working capital line of credit for your business.

1. Understand the requirements

You’ll want to evaluate your business to determine where you can qualify for a working capital line of credit. Overall, requirements vary from lender to lender, but they’ll typically consider the following criteria:
  • Personal credit score. In general, the stronger your credit score, the more financing options you’ll have available. Traditional lenders will usually require that you have fair to good credit — ideally a score of 650 or higher — to qualify for their products. Online lenders, on the other hand, are often more flexible. You may be able to qualify for a credit line with a personal credit score as low as 600.
  • Time in business. Similar to your credit score, lenders prefer to see that you have an established business history. Some (but not all) banks will ask to see two or more years in business, whereas online lenders may require only six months or more.
  • Annual revenue. Minimum annual revenue requirements can range, but overall, you should be able to show your lender a history of solid financial performance. It can also be helpful to present strong cash flow and sales projections.

2. Research and compare lenders

Once you have an understanding of your business’s qualifications, you can begin to research different small-business lenders. The right lender for you will depend on a variety of factors.
For example, if speed is your top priority, an online lender will likely be able to fund your credit line the fastest. On the other hand, if you’re looking for the lowest possible interest rate you can get, you should start your search with a bank or credit union.
As you compare lenders, you should consider information including:
  • Credit limits.
  • Interest rates and fees.
  • Repayment terms.
  • Funding speed.
  • Application process.
  • Customer support.
  • Lender reputation.

3. Gather your documentation and apply

Next, you can collect the paperwork you’ll need to complete your line of credit application. Although requirements vary, you’ll likely be asked to provide:
  • Personal information about you and any other business owners.
  • Basic business information and paperwork.
  • Personal and business bank statements.
  • Personal and business tax returns.
  • Business financial statements (e.g., profit and loss statement, balance sheet).
If you’re working with an online lender, you may have the option to digitally connect your financial accounts to expedite the application process. Some banks and credit unions may allow you to apply online, but others might require you to visit a branch to submit an application in person.

Find the right business loan

The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.
Last updated on November 2, 2023

Methodology

NerdWallet reviewed traditional and online lenders to create our list of the best working capital lines of credit.
Our list includes a variety of loan options to meet the diverse funding needs of small-business owners, with an emphasis on lenders that offer a streamlined underwriting and approval process.
Each small-business loan option on our list meets the following criteria:
• Maximum loan amount of at least $50,000.
• Transparent rates and repayment terms.
• Personal credit score requirements of 700 or below.
• No more than two years in business required.

Wondering if you qualify?

It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.

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