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A Guide to Working Capital Loans

Updated: December 18th, 2023

A Guide to Working Capital Loans

Every business needs a healthy amount of working capital to grow. Working capital is the available capital a business has to cover daily operating expenses, like paying rent or purchasing inventory.

Essentially, it’s the difference between a company’s current assets, such as cash or cash equivalents, and its current liabilities, like accounts payable or income taxes.

Depending on the financial state of your company and your particular business goals, you may need additional working capital to get ahead. You might have plans to relocate your business to a new city, for example, which means you’ll need enough funds for a security deposit, several months of rent, potential renovations, actual moving expenses, and more. An online cash flow management tool like Float lets you see your financial situation in real time, so you can easily determine whether or not you need a loan.

Or, if you want to hire a new employee, you’ll need enough money to cover a salary, income taxes, work materials, and training.

In any case, extra working capital can free you up to focus less on financial concerns and more on growing your business. When it comes to financing, there are a few routes you can take.

Where to find working capital loans

Before you research options, get clear on your business plans going forward. Outline what you want to accomplish, then determine how much it will cost. From there, you can review your balance sheets, profit and loss statements, and cash flow projections to figure out exactly how much money you need to borrow and when.

Ideally, you’ll want to secure enough financing to carry out your plans — plus a little extra to account for unexpected issues — without going into deep debt.

Not sure how to get working capital for your business? Here are three of the most common options.

1. SBA term loan

The Small Business Administration (SBA) backs certain types of working capital loans to help small business owners.

The most common loan is the SBA 7(a). Though rates are generally fair, the application and approval processes are time-consuming.

To apply, you have to prepare a business plan and gather a variety of documents, including profit and loss statements, tax returns, legal papers, and personal and business credit reports. After you submit your application, it usually takes around 90 days to receive a response.

If you can wait to execute your plans, the SBA 7(a) could be a good option. If, however, you need funds quickly — maybe you have to put down a security deposit to secure your lease on a new office building, for example — you may not want to go this route.  

2. Merchant cash advance

Merchant cash advances are designed to get you money fast — sometimes within a day or two — but the rates are typically extra high as a result. Instead of fixed, once-monthly payments, MCAs often require you to make daily or weekly payments using a percentage of your daily sales. This makes it tricky to increase your cash flow over time.

Plus, MCAs have a myriad of additional service fees and administrative fees, and because of these hidden charges, most MCAs work out to 40% APR or more — sometimes even reaching triple digits!

3. Independent lender

Another option when you’re exploring types of working capital loans is a peer-to-peer lender like Funding Circle. Our business loans were designed by small business owners who understand the value of fast, affordable financing.

When you want to grow your business, you need enough working capital to keep up regular operations and start new projects. Funding Circle loans can help — our rates are competitive with traditional bank loans. You can borrow with flexible terms over six months to five years, with competitive interest rates.

Once-a-month payments mean you always know exactly what you’re spending, plus there are no hidden fees or prepayments penalties. If business is thriving and you’re ready to pay off your loan early, you’ll only pay interest for the time you borrowed.

We know working capital financing gives you the freedom to execute your plans based on strategy, not fear of failure, so we want to make it as easy as possible to get started. You can apply online in just 10 minutes and receive a response in as little as 24 hours.

Working capital financing can bring your business to the next level. If you’re ready to grow your operations and don’t know how to get working capital, Funding Circle can help. Learn more about our small business loans, or find out your rate.


Affordable business financing. Crazy fast.

Funds delivered in days, not months.

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