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A working capital loan helps cover your small business's operation costs. With many great options available, find out which working capital loan will work best for you.
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Editor & Senior Staff Writer
Last updated onUpdated
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Working capital loans are one of the most versatile kinds of business loans you can get. Whereas some business loans come with certain restrictions, working capital loans cover operating costs.
Because working capital covers such a broad category of financing, you’ll find that the loans themselves fall into a variety of different types and arrangements. As it can be difficult to parse the sheer volume of working capital loans available, we’ve done some of the grunt work for you.
Read on to see which options we think are the best for businesses seeking non-traditional working capital.
Learn More About Our Top Picks
| Company | Best For | Next StepsBest For |
|---|---|---|
Lendio
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AdvancePoint Capital
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OnDeck
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SmartBiz
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Fundbox
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| Show More Options | ||
LoanBuilder
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Accion
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BusinessLoans.com
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| Show Fewer Options |
Read more below to learn why we chose these options.
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Table of Contents
A working capital loan is a form of financing that is used to cover day-to-day operating expenses rather than hard assets or major investments.
Working capital loans are used for overhead expenses like payroll, utilities, inventory, rent, and similar expenses should the merchant have a gap income or need to smooth out cash flow.
Working capital can come in several different forms, but most frequently is offered through term loans or lines of credit.
The best working capital loans should have competitive rates and terms, an easy application process, and borrowing limits that cover a variety of business expenses.
Based on our research, here are the best working capital lenders for small businesses that are looking for loans outside of the traditional banking system.
| Funding Type | Max Borrowing Amount | APR | Credit Score | |
|---|---|---|---|---|
| Lendio | Term loans, STLs, MCAs, LOCs | Varies by lender/product | Varies by lender/product | N/A |
| AdvancePoint Capital | Term loans, STLs, MCAs, LOCs | $500,000 | Varies by product | 650 |
| OnDeck | Term loans, lines of credit | $250,000 | Starts at 29.9% | 625 |
| SmartBiz | Term loans, SBA loans, LOCs | Varies by product | Varies by product | Varies by product |
| Fundbox | Lines of credit | $150,000 | Fees start at 4.66% | 600 |
| LoanBuilder | Short-term loans | $150,000 | Starts at 2.9% | Undisclosed |
| Accion | Term loans, equipment financing | $250,000 | Starts at 8.49% | 600 |
| BusinessLoans.com | Term loans, STLs, MCAs, LOCs | $3 million | Undisclosed | N/A |
Pros
Cons
Lendio is a lending platform that serves as a bridge between applicants and a pool of partnered lenders, many of which offer working capital loans. When you apply to Lendio, you’re effectively applying to the 75+ lenders in Lendio’s lending pool. Lendio will then match you with one or more lenders. Even better, Lendio does not charge applicants a fee for using its service.
Lendio has multiple options for businesses that need working capital. This includes everything from flexible lines of credit to long-term Small Business Association loans.
Pros
Cons
Similar to Lendio, AdvancePoint Capital is a loan marketplace that allows borrowers to connect with multiple lenders and apply for various types of funding with one application. The application process is fast and easy, short- and long-term funding options are available, and fast funding is available if you need capital in a hurry.
AdvancePoint has a wide range of products available, including long-term loans and SBA loans for established businesses with good credit and business cash advances, invoice financing, and short-term loans that may be a suitable fit for startups or borrowers with lower credit scores.
Get Started With AdvancePoint Capital
Pros
Cons
OnDeck offers term loans and lines of credit to qualified borrowers, both of which are quickly disbursed and well-suited for working capital. While borrowing from OnDeck is more expensive than turning to your local bank, the lender has less stringent borrower requirements, faster times to funding, and rates that are competitive with other alternative lenders.
Some borrowers can receive funds from a term loan as quickly as the same day, while smaller draws on lines of credit can be funded instantly. You won't find funding this fast with most other lenders.
Pros
Cons
With rates just a little bit above prime and repayment periods spanning years, SBA 7(a) loans are a low-cost way to get working capital. The downside? SBA loans can be time-consuming and labor-intensive to get.
SmartBiz aims to make that process a little easier, first by helping you determine whether or not you’re eligible and secondly by taking you through the byzantine application process for an SBA loan. SmartBiz is not a direct lender, but instead works with a pool of SBA-approved lenders to get you your funds. You can also get a non-SBA loan or line of credit through one of SmartBiz’s partners.
Pros
Cons
Fundbox offers a simple and effective line of credit solution for businesses seeking working capital. Better still, Fundbox is accessible to most borrowers and can deliver funds as quickly as the next business day after approval.
Pros
Cons
PayPal offers many services under its massive umbrella. For most of these, you have to have a PayPal account or otherwise be a part of PayPal’s ecosystem. LoanBuilder is a notable exception and one that can be very convenient for businesses looking for quick, short-term working capital at competitive rates.
Pros
Cons
Businesses that often go underserved in the lending market -- minority-, women-, and veteran-owned businesses -- have the same working capital needs as any other business. Accion specializes in lending to these types of businesses and even offers financial support for some startups.
Additionally, equipment financing is available through Accion.
Pros
Cons
BusinessLoans.com is a lending marketplace that offers a wealth of lending services to small businesses, including those with bad credit.
A single application grants access to BusinessLoans.com’s entire network of lenders, so it’s also a great time-saving option for businesses that want to review multiple loan offers.
Get Started With BusinessLoans.com
We spend hours researching and evaluating each business loan marketplace we review at Merchant Maverick, placing special emphasis on key characteristics to generate our ratings.
When rating lending marketplaces, we use a 39-point rubric that looks at rates and fees, services, eligibility requirements, application, sales and advertising transparency, customer service, and user reviews. We weigh each section differently to calculate the total star rating.
Each section is further broken down into granular, weighted subsections, in which we examine specific attributes like the variety of lending products and partners available, terms lengths, conditions of repayment, credit score and revenue requirements, ease of application, length of time to funding, the ethics involved in promoting the loan marketplace.
Read more about how we rate loan marketplaces.
As you’re considering a working capital loan, you’re also probably asking yourself: how much working capital does my business need?
Ideally, you want enough working capital to cover your business expenses and pay your debts, but you also want to use your assets to further invest in your business.
It’s important to seriously consider your business’s needs and goals before committing to a loan. Ask yourself these questions to determine if taking out a working capital loan is the right solution for your business:
Before jumping into a loan agreement, you may find other ways to solve your business’s cash flow needs. Try cutting back on unnecessary expenses or giving customers incentives to pay invoices quickly. You may also be able to identify certain inventory items that don’t sell fast enough or cost too much to keep stocked.
Making changes to the way you conduct business may allow you to smooth out your cash flow without having to take out a loan.
Whenever you borrow money, you ought to have a plan. If you take out a working capital loan without a clear idea of how you want to use the money, you’ll be putting your business in a poor financial situation. Evaluate which issues your business is trying to solve (e.g., business expansion, seasonal sales fluctuations, etc.) and carefully consider whether a working capital loan is the best solution for these issues.
You don’t just need to know how you’ll use the money; you also need to know that the loan will ultimately be beneficial for your business.
Depending on the fees and repayment schedule, a working capital loan could send your business into a debt spiral. Before getting a working capital loan, make sure you can afford the repayments. Ask yourself: Do the benefits outweigh the costs of the loan?
Speaking of costs, before committing to a loan, you need to make sure you understand all of the loan’s rates and fees. Know everything you can about the loan’s interest rate or factor rate, APR, cents-on-the-dollar costs, additional fees, and more before you sign any contracts. This way, you can be confident you are selecting from amongst the best small business loans.
Our free small business loan calculators can help you fully understand the rates and fees associated with a loan.
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The vendors that appear on this list were chosen by subject matter experts on the basis of product quality, wide usage and availability, and positive reputation.
Merchant Maverick’s ratings are editorial in nature, and are not aggregated from user reviews. Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships.
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