Working capital loans can help you pay for operational costs, such as rent, payroll and debt payments. They give you the flexibility to invest in your company’s growth and cover day-to-day expenses, but you shouldn’t use them for long-term investments, such as real estate.
Banks offer the lowest financing rates on these loans, so if you own an established business with strong cash flow, you may want to start there. But if the bank says no or if you need cash fast, you can turn to alternative lenders.
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Working capital loans for everyday needs
The term working capital can encompass virtually every facet of your finances, but ultimately you need it to, well, keep your company working. That could include coping with seasonal dips in revenue, covering maintenance costs, keeping your payroll up to date or managing your inventory.
If your personal credit score is at least 500: Kabbage offers a quick working-capital line of credit up to $150,000.
- Pro: Good option for borrowers with poor credit who need fast cash
- Con: Annual percentage rates can reach 99%
If your personal credit score is more than 600: StreetShares is a peer-to-peer lender that offers lines of credit and term loans to businesses making at least $25,000 a year.
- Pro: Good option for businesses with low revenue
- Con: Can borrow only up to 20% of your annual revenue
If your business needs more than $100,000, a term loan from OnDeck is an option.
- Pro: High borrowing amounts of up to $500,000. Minimum personal credit score is 500, but most borrowers have 660 or higher.
- Con: APRs can reach 99%
Working capital loans for large purchases
If you need a large sum to cover an equipment purchase or minor expansion project, focus your search on lenders that offer the lowest APRs and longer repayment terms.
- Pros: Lowest APRs on the market and a 10-year repayment term
- Con: Application process is rigorous and it takes longer to get funding — typically several weeks, compared with a few days with other online options
For quick funding and competitive rates: Funding Circle offers loans of up to $500,000 and is a good option for good-credit borrowers.
- Pros: Competitive APRs for borrowers who want cash fast; no minimum revenue required
- Con: Not for newer businesses
Bond Street offers loans of up to $1 million for businesses with strong cash flow.
- Pro: Can get funding in three to four business days
- Con: Higher personal credit requirement compared with other options
Working capital loans if you have 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 financing. It’s a good option when you’re in a pinch, although high APRs do make these services pricey.
For businesses with strong-credit customers: BlueVine can front you cash of up to $2 million even if your business is less than a year old and you have poor credit.
- Pro: Good way to tap into a customer’s strong credit score
- Con: If your customer doesn’t pay you, you’re still on the hook for the loan
For businesses with shaky credit: If you need fast financing, Fundbox can get you cash in one to three business days.
- Pro: No minimum revenue or personal credit score required to qualify
- Con: Must have access to accounting software like QuickBooks
Working capital loans: Compare your options
In the table below, scroll right to see all the lenders.
Evaluate small-business loans carefully
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. To evaluate other loans, you can go to NerdWallet’s small-business loan tool. NerdWallet’s list of lenders is based on factors including market scope, customer experience and lender trustworthiness.
Updated June 2, 2017.