How to Get Working Capital Loans for Small Business: 2022 Update

working capital for small business

If you are an American small business seeking working capital finance on an instant basis, you have come to the right place. Here at, we list the best working capital loans for small businesses in the US. These are offered by highly regarded online lenders with a great reputation. Most notably they are able to process your loan application and release funds within a matter of days. Some of these working capital lenders are more rigid in their requirements and some of them are oriented towards issuing working capital loans for small business with bad credit – just be sure to explore our relevant pages and thorough company reviews. Read on to learn more about working capital loans and the best working capital loans for small business.

What is Working Capital?

The formal definition of working capital is as follows…

the capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. 

Current assets will include your companies:

  • Cash in the bank
  • Accounts Receivable
  • Inventory

Current liabilities will vary more but can generally be regarded as upcoming expenses within a year:

  • Accounts Payable
  • Tax Payable
  • Payroll
  • Short-term debt obligations.

In practice, we talk of working capital as the cash required to manage your business on a daily basis, which can encompass virtually all of your financial obligations. Your working capital could vary due to seasonality, stock orders or payroll expenses.

Businesses need to ensure they have enough cash to maintain their current operations and look to invest and grow their business with any excess cash.

What Is A Working Capital Loan?

Working capital loans can help you pay for operational ‘everyday’ costs such as stock, payroll, and rent. If your business is encountering trouble covering ordinary business expenses, perhaps due to fluctuations in sales, delayed accounts receivable or any other reason then you may be eligible for a working capital loan.

If your business takes on a working capital loan then you should factor in your ongoing debt obligations as part of your working capital requirements too. Working capital loans are typically offered with short repayment terms and can often reflect a month or so’s revenue that your business can make.

Does my Business Require a Working Capital Loan?

As well as the cash in the bank that your business holds, your current assets consist of your current inventory and accounts receivable (money owed to the business but not yet paid). Working Capital liquidity remains an important aspect to consider as well – how quickly can you convert that stock to cash and how quickly can you receive payment for the sales you’ve already made. That’s why invoice financing (where you receive immediate payment for your unpaid invoices) can be a very popular form of a working capital loan  – more on this later.

Businesses can gain a better understanding of their current working capital situation by understanding their working capital ratio. The ratio looks like this:

Current Assets ÷ Current Liabilities = Working Capital Ratio

So by simply totaling up the current value of your current assets and dividing this figure by the total value of your current liabilities you can understand your working capital ratio. It is generally regarded that if your working capital ratio is below 1.2 your business could be vulnerable to sudden changes in liabilities.

How Can I Use Small Business Working Capital Finance?

If your business is upside down on its working capital ratio (in other words, if you have more liabilities than assets), you may need more working capital to operate, pay bills, and even secure affordable financing. If your small business is growing, you may need a working capital loan to help you achieve your goals, such as growing your team, securing more contracts, increasing your inventory, and increasing your marketing spend.

Of course, it must be noted every business has its own set of circumstances and will encounter its own unique challenges. If you believe just one or two small changes could have a severe impact on your working capital then your business needs to be in a position to respond to a change in circumstances quickly. A line of credit might be the best option in this case – more on this later too.

Best Working Capital Loans for Small Businesses

Working Capital Term Loans / Short-term Loans

When most people think of business loans they probably picture a long-term 5-10 year loan from their bank. When banks issue longer-term loans (say over one year) borrowers are expected to pay back the initial loaned amount, plus interest, in fixed installments. But it’s worth noting most online short-term loan providers will present you with a total repayment amount instead of interest rates. The amount you are to pay back is thus much more transparent but can prove more expensive than repayments based on interest rates.

Short-term loans, in which you simply have a date you are to repay your loan by – perhaps 3-12 months from now, are probably the most popular lending solution for businesses seeking to raise their Working Capital. Most working capital needs are short-term, so short repayment terms fit those requirements perfectly. Short-term working capital loans are generally easier to qualify for than long-term loans, making them a good option for early-stage businesses too.

Best For Short-Term Business Loans Working Capital

Starting at $5,000 and capped at $500,000 OnDeck offers term loans from 3-36 months. Paying back a term loan with OnDeck is easy as automated daily or weekly bank deductions ensure you don’t fall behind on your repayment schedule. Same day funding also means it’s possible to receive funds on the same day your loan is approved.

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SBA Working Capital Loans

The SBA 7(a) loan is the flagship term loan program of the SBA. However, the SBA also offers specialized loan programs for different circumstances. Small businesses that need working capital might also qualify for the SBA’s export working capital loan and SBA microloan program.

Remember, the SBA doesn’t provide the loan itself but rather guarantees a portion of your loan, so if you don’t have the collateral necessary to secure a low-cost loan by yourself, a 7(a) loan is a very sensible option or maybe redirect your focus to an unsecured loan. As SBA loans are government-backed, you should expect the application process to be lengthy. Terms can also exceed one year so they aren’t purely for working capital purposes.

Best for SBA Working Capital Loans

SmartBiz specializes in arranging SBA loans for small businesses. These low-cost loans can often be tricky to apply for directly with an SBA approved bank. SmartBiz will guide your business through the application process to help you get the best and cheapest financing that meets your working capital needs and matches your loan application with the trusted bank most likely to fund your business.

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Small Business Working Capital Line of Credit

The key for many small business owners is flexibility and as far as business financing goes, a revolving line of credit is probably the most flexible solution you can find. Receive pre-approval for the total amount you can receive and then draw only as you need and pay only for what you use. Business owners can decide to draw none, draw some, or draw the full value of their line of credit and repay it when they can. Once each drawdown is repaid businesses can redraw that amount again in the future – just like a business overdraft.

Best for Working Capital Line of Credit

Fundbox provides funds available on demand. Applying is easy – share some basic information, integrate your accounting software plus your bank account and receive a credit decision in minutes. Funds are then available in a matter of days and business owners can draw funds with a click of a button.


Invoice Factoring Working Capital

If you have a number of outstanding invoices or even a large singular invoice that remains unpaid, invoice factoring could be the single fastest method to convert those invoices into cash. Invoice factoring companies will typically advance 80% of the value of an invoice to you when you issue it to your customer. The factoring company then collects payment for you on your behalf and will follow up with the rest of the invoice value (less their lending fees) when it receives payment from your customer – typically in line with your 30, 45 or 60 day payment cycles.

The invoices act as collateral, meaning you aren’t required to secure the loan with any of your own precious assets, just with money due to the business. This means it’s also a very organic lending cycle too – you never borrow more than what is due to your business in the first place.

Best Working Capital Provider for Invoice Factoring

Bluevine Capital Invoice Factoring allows businesses to get an advance on their outstanding invoices turning unpaid invoices into cash. Business owners can decide how many and which invoices to submit so Bluevine only funds what you need, when you need, without long-term contracts.

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PayPal Working Capital

PayPal is one of the most recognizable names in the e-commerce space, but what you may not know is that they also offer small business working capital loans. PayPal Working Capital is for eCommerce businesses and specifically those who generate a lot of sales through PayPal. The working capital you can receive is based only on your PayPal sales history, so you receive an amount that fits your business. There’s also no credit check when you apply, so there’s no effect on your credit score.

The repayment schedule is streamlined in such a way that repayments are deducted from future sales through PayPal and make your loan repayments before funds even hit your bank account.


Working Capital Loans – What to Watch Out For

Choosing the most appropriate working capital loan for your business will be an important first step in aiming to improve your working capital and prioritizing exactly why you need the money will mean you only spend it on the things that matter most, like construction equipment. After all, the aim of the loan is to put your business in a better financial situation in the long run.

Cash in the bank will boost your current assets but your future debt obligations will negatively impact your working capital ratio as your current liabilities will increase. As always you must ensure the benefits outweigh the cost and you’ve evaluated other alternatives to improve your cash flow. As an example, businesses seeking invoice factoring may be able to offer their existing customers an incentive to pay earlier and still save money compared to using an invoice factoring company.

Working capital is central to running a successful business. Organically this can be boosted by increased sales and keeping a careful eye over costs. However, there are times when a working capital loan will be the best course of action. Whether you’re looking to raise money to cover your costs or you plan on investing in the growth of your business there are many working capital loans for small business that can help you succeed. We hope our guide on how an independent editorial view of the best working capital loans for small business is helpful in your research.