Compare Working Capital Loans

  • If your business needs funds to pay for everyday operational costs then you could consider a working capital loan
  • Compare specialist UK providers of working capital loans in our comparison table below
  • Find available loan amounts and terms to suit your needs and apply direct

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Information written by Rhiannon Philps Last updated on 06 May 2022.

Working capital loan definition

A working capital loan is simply a business loan that is designed to help a business cover a temporary shortfall in their cash flow, or working capital.

Working capital is broadly defined as the amount of cash a business has available to spend on the daily running of their operations, and is calculated by subtracting current liabilities, such as rent, bills, wages and payments owed, from current assets over the next 12 months.

Sometimes businesses may not have sufficient working capital to pay for their regular expenses. A working capital loan aims to offer a solution to this problem by providing businesses with short-term finance that will boost their working capital and allow them to pay for what they need.

Businesses can use a working capital loan for a variety of purposes, such as:

  • everyday expenses, e.g. rent, bills or the payroll
  • paying suppliers
  • buying equipment
  • covering emergency expenses
  • paying for stock

Essentially, the loan aims to help businesses manage their finances by improving their cash flow.

Bear in mind that working capital loans are not intended for long-term investments in your business, but to cover short-term needs.

How do working capital loans work?

Once you have a working capital loan, you will normally be able to use it as you wish. Lenders won’t usually impose restrictions on what you can spend it on, so you could use it to pay bills or buy stock, for example.

To repay it, you will make the monthly payments as agreed with the lender. Terms of working capital loans tend to be relatively short, ranging from a few months to a few years.

While many working capital loans are unsecured, some may be secured on property or you may need to give a personal guarantee to the lender that you will repay the loan if your business can’t.

What are the advantages of a working capital loan?

The main benefit of a working capital loan for businesses is that you can apply for and receive funds relatively quickly. Some providers will even send you funds within 24 hours of approval.

This means businesses can quickly boost the amount of cash they have to spend, so it can help to cover any temporary dips in revenue.

Most lenders won’t set restrictions on what a working capital loan can be used for, so businesses have some flexibility in how they spend it. Because working capital loans are short-term, you pay them off fairly quickly. This means you won’t have to pay interest and repayments for many years to come.

Furthermore, most working capital loans are unsecured, so the property of your business won’t be at risk. However, you should still check with the provider as some loans will be secured and/or require a personal guarantee.

What are the disadvantages of a working capital loan?

While working capital loans can offer much-needed help to businesses, there are certain points you need to bear in mind.

One of the most important points is that these loans are designed to offer short-term funding. The terms for working capital loans can be as short as a few months, so you need to be confident that your business would be able to repay the loan in full relatively quickly.

Working capital loans can have higher interest rates, so compare providers and see what deals your business qualifies for.

When are working capital loans a good idea?

Working capital loans might be worth considering if your business experiences major fluctuations in revenue. For example, if your business is seasonal with some months busier than others, your level of working capital might be lower than you would like in quieter periods. This can make it hard to meet all your operating costs and expenses, so a loan could tide you over until sales pick up again.

They can help businesses to stabilise and manage their finances in the short term, and help them to pay for expenses, such as rent, bills, stock and wages.

It is not just seasonal businesses that experience fluctuations in their cash flow and could find a working capital loan useful. For example, if your business has a lot of money tied up in stock, you may need a short-term loan to cover costs until you sell it all. Ultimately, any business with a low level of working capital that needs a cash injection to cover its immediate expenses may choose to consider working capital finance.

Bear in mind that you should only take out a loan if your cash flow problems are temporary and you expect them to recover. These loans will not help your business if the drop in cash flow is more permanent.

Working capital loans are not the best option if you are looking for funding for long-term investment.

How to get a working capital loan

Make sure you check the eligibility criteria for working capital loans, as lenders may require you to have a minimum number of years trading and a separate business bank account.

If your business qualifies, you can then apply for a working capital loan online by submitting relevant information about you and your business.

Lenders are likely to want to know details about your trading history, your average turnover, the size of loan you want to apply for and what you want to use the loan for.

They will use this information, as well as your business’s credit score, to make a decision on your application.

If successful, you will normally receive the loan relatively quickly, sometimes within 24 hours.

What are the alternative ways working capital is financed?

Working capital loans are not the only way you can cover any short-term cash flow issues. The type of working capital finance that is most suitable for your business depends on the type of business you run and your individual circumstances, so it’s worth considering other options to see if they are more suitable.

All of the options below allow you to access cash relatively quickly but they work in different ways.

Line of credit. This is a flexible type of finance that you can draw on as and when you need to. The lender gives you access to a set sum, but you can choose when and how much you borrow and only pay interest on what you use. Find out more about business credit lines.

Invoice financing. This is a specialist type of business finance that allows you to release cash from unpaid invoices if you need the money immediately, rather than waiting for the customer to pay the invoice. Borrowing through invoice finance will come at a cost.

Overdraft. Your business bank account is likely to come with an overdraft that you could use if your business is temporarily short of cash. This can be a fast way to access funds, but check what fees and charges could apply.

Merchant cash advance. With this type of finance, your business can borrow a sum of money from a lender, which will be based on the income you make each month. Repayments will be taken from a percentage of each debit and credit payment you receive. Lenders work with card providers to facilitate this. Find out more about merchant cash advances.

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How does NerdWallet’s working capital loans comparison work?

If you think your business could benefit from a working capital loan, you can use our comparison table to see some of the options that are available to you. You will be able to see information, such as the size of loans offered, the repayment terms, and the eligibility criteria set by the lender, including trading history and minimum annual turnover.

Working Capital Loans FAQs

What is a good working capital?

The level of working capital that is “good” will vary between businesses and industries. A working capital ratio of around 2.0 is considered good, while anything below 1.0 is seen as cause for concern.

How is your working capital ratio calculated?

You can work out your working capital ratio by dividing the assets your business currently has with its current liabilities. Business assets might include money in your business account, your inventory, and other assets that can be converted to cash relatively quickly. Examples of liabilities could include rent, bills, debts, and taxes. Dividing your assets by your liabilities will give a number that shows your working capital ratio. A higher number is generally better for your business and shows it is in good financial health.

Do you want high or low working capital?

If the working capital of your business is too low, it means your business could struggle to pay day-to-day expenses. Having a high level of working capital shows your business is in a healthy position with enough cash in reserve to invest and expand.

Does a working capital loan affect my personal finances?

A working capital loan is linked to your business, so shouldn’t affect your personal finances. The exception is if you provided the lender with a personal guarantee that you would repay the loan if your business couldn’t. Read more on how business loans could affect your personal finances.

How long will it take to get a business loan for working capital?

This will depend on the lender, but you can normally receive a working capital loan soon after your application is approved. Working capital finance is designed to be a quick solution for businesses which need a cash flow boost and some providers will make a decision within 24 hours.

Do I need a business account to apply for a business loan?

This can depend on the lender, but many providers will only offer loans to businesses that have a separate business bank account.

Can I get working capital finance with bad credit?

You may be able to get a working capital loan with bad credit from some lenders, but other lenders may be more reluctant to approve your application or set higher interest rates. You may improve your chances of getting accepted if your loan is secured against an asset or you provide a personal guarantee.

Can I pay off my business loan early?

Yes, most providers will allow you to pay off your loan early. Check if you would have to pay any early repayment charges if you choose this option.

Can I get a working capital loan to start a business?

Not normally. Working capital loans are designed to help existing businesses with their cash flow, rather than giving startups an injection of cash to get their business off the ground. Many lenders will require businesses to have a certain number of years’ trading history to qualify for a working capital loan.

If you need finance to fund your new business, a startup business loan is likely to be more suitable.

About the author:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

Compare business loans

4 products found
  • Swoop Funding Working Capital Loans logo

    Swoop Funding Working Capital Loans

    • Plug gaps in your short-term budget
    • Provides financial security for unexpected costs
    • Can help you to keep your business finances running smoothly
    • Minimum Turnover
      £50,000 p.a.
    • Available Amounts
      £2,000 to £1,000,000
    • Available Terms
      3 months to 3 years
  • Funding Xchange Working Capital Loans logo

    Funding Xchange Working Capital Loans

    • Discover instant & personalised Working Capital offers in just 3 minutes
    • Finance your company’s everyday operational needs
    • Compare working capital lenders and find the rate right for you
    • Minimum Turnover
      £100,000 p.a.
    • Available Amounts
      £1,000 to £500,000
    • Available Terms
      1 month to 5 years
  • iwoca Working Capital Loans logo

    iwoca Working Capital Loans

    • Flexible credit facilites suitable for boosting working capital
    • Early repayment with no fees
    • Dedicated account manager and decisions within 24 hours
    • Minimum Turnover
      £50,000 p.a.
    • Available Amounts
      £1,000 to £200,000
    • Available Terms
      Up to 12 months
  • JD Capital Finance Working Capital Loans logo

    JD Capital Finance Working Capital Loans

    • Funding solutions to help with cashflow issues
    • Can be used for any day-to-day business expenses
    • A short term option that can be tailored to suit your business needs
    • Minimum Turnover
      £100,000 p.a.
    • Available Amounts
      £10,000 to £1,000,000
    • Available Terms
      3 months to 5 years
  • Suppliers that don't offer All Business Working Capital Loans but may offer suitable alternatives:

    • Nationwide Finance Business Finance logo

      Nationwide Finance Business Finance

      • Nationwide Finance help 35,000 businesses get finance each year
      • Direct funder - not a broker
      • Same day decision, funds within 24 hours
      • Minimum Turnover
        No minimum
      • Available Amounts
        £10,000 to £500,000
      • Available Terms
        1 to 5 years
    • Funding Circle logo

      Funding Circle

      • Your business must have a minimum of 2 years’ trading history
      • A leading UK platform for small business loans
      • Simple online application and decisions in as little as 5 hours
      • Rates from 3.9% per year - No early settlement fees
      • Minimum Turnover
        £16,700 p.a.
      • Available Amounts
        £10,000 to £500,000
      • Available Terms
        2 to 6 years
    • Puzzle Funding logo

      Puzzle Funding

      • Free service matches your business with over 100 lenders in seconds
      • Apply in 3 minutes and get funds in as little as 1 hour
      • High acceptance rate
      • Minimum Turnover
        £100,000 p.a.
      • Available Amounts
        £1,000 to £15,000,000
      • Available Terms
        1 month to 25 years
    • Capify logo


      • Your business must have a minimum of 1 years trading history. No sole traders.
      • Capify loans are paid back in very small automated regular payment; either daily or weekly
      • A fast and easy business funding alternative for SMEs
      • Funds can be used for any business purpose, from managing cashflow through to improving technology
      • Minimum Turnover
        £120,000 p.a.
      • Available Amounts
        £5,000 to £500,000
      • Available Terms
        3 to 18 months
    • Fleximize logo


      • Industry-leading flexibility - top-ups, repayment holidays, penalty-free early repayment, no set-up fees
      • Interest charged on reducing balance, not total loan amount - repay early and only pay for the time you had the loan
      • Apply online in five minutes, typically get a decision in 24 to 48 hours, receive funds the same day
      • Minimum Turnover
        £60,000 p.a.
      • Available Amounts
        £5,000 to £500,000
      • Available Terms
        3 months to 4 years
    • Cubefunder logo


      • Only available to Limited Companies in England and Wales with 3+ months' trading.
      • Fast and Flexible funding from £5,000 - £100,000 for Limited Companies within England and Wales
      • No penalties for Late payments or Early repayment
      • Apply and receive funds within 48 hours
      • Minimum Turnover
        £50,000 p.a.
      • Available Amounts
        £5,000 to £100,000
      • Available Terms
        3 months to 1 year
    • 365 Business Finance logo

      365 Business Finance

      • Your business must process credit and debit card transactions to apply for this product
      • A flexible business funding alternative
      • Cash advanced against card transactions
      • Pay back an affordable % of your card transactions
      • Minimum Turnover
        £10,000+ card transactions per month
      • Available Amounts
        £10,000 to £300,000
      • Available Terms
        4 to 18 months

Our comparison service features a selection of providers from whom we receive commission. This table is initially ordered according to our commercial arrangements. You can use the options above the table to order it according to various criteria.

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