7 Best Working Capital Loans For Small Businesses For 2023

Pros

Borrower qualifications are lower than banks
Multiple types of financing available
Low credit score requirements for some products

Cons

Rates can be expensive
Funds can take awhile to disburse
Application process can be slow

Why We Chose Lendio For Best Working Capital Loan

Lendio is a lending platform, meaning that they serve 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 all of the lenders in Lendio’s lending pool. Lendio will then match you with a lender or lenders. Even better, Lendio does not charge applicants a fee for using its service.

There are no minimum borrower requirements for Lendio, but you can generally expect to have more matches the better your credit score is, the longer you’ve been in business, and the higher your monthly revenue is. Interest rates vary by lender and loan type.

Lendio Services

Lendio offers nearly any type of funding you need for your business, including:

Short-term loans up to $500,000
Term loans up to $2 million
Lines of credit up to $500,000
Merchant cash advances up to $200,000
SBA loans up to $5 million
Equipment financing up to $5 million

Lendio Rates & Fees

Lendio’s rates and fees vary based on product type and the lender you select. Lendio has low-interest options such as SBA loans, as well as more expensive funding like MCAs for borrowers with bad credit or other challenges.

Lendio Eligibility Requirements

Lendio works with multiple lenders, and each lender has its own set of eligibility requirements for funding. However, Lendio recommends having a credit score of at least 550 to qualify. Additionally, the more revenue, higher credit score, and longer time in business you have, the better odds you have for qualifying for better rates and terms.

Get Started With Lendio

2. OnDeck: Best For Fast Working Capital

OnDeck

Pros

Multiple types of financing available
Application process is fast & easy
Funds are disbursed quickly

Cons

Rates can be expensive
Not available to businesses in some industries

Why We Chose OnDeck For Best Working Capital Loan

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.

OnDeck Services

OnDeck offers term loans up to $250,000 with repayment terms of up to 24 months. OnDeck also offers lines of credit up to $100,000 with repayment terms of 12 months.

OnDeck Rates & Fees

For OnDeck’s term loans, APRs range from 29.9% to 97.3%, with most borrower’s paying an average of 62.1%. An origination fee of up to 5% may apply.

OnDeck’s lines of credit have APRs that range from 29.9% to 65.9%, with the average borrower paying about 48.9%. There are no origination fees, but a $20 monthly maintenance fee will apply to most borrowers.

OnDeck Eligibility Requirements

Applicants for an OnDeck loan or line of credit must meet the following qualifications:

1 year in business
625+ credit score
$100,000 per year in revenue

Get Started With OnDeck

3. SmartBiz: Best For Long-Term Working Capital

SmartBiz

Get Started With SmartBiz

Pros

High borrowing amounts
Rates tend to be expensive
Long-term financing options

Cons

Borrower qualifications might be hard to meet
Funds can take awhile to disburse

Why We Chose SmartBiz For Best Working Capital Loan

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 through one of SmartBiz’s partners.

SmartBiz Services

SmartBiz offers the following products through its lending partners:

SBA loans up to $350,000
Bank terms loans up to $500,000
Lines of credit up to $150,000
Custom financing up to $500,000
ERC refunds

SmartBiz Rates & Fees

Interest rates for SBA loans range from 10.5% to 11.5%. Term loans have interest rates starting at 8.99%. Custom financing rates start at 6.99%.

OnDeck Eligibility Requirements

SmartBiz’s borrower requirements are as follows:

2 years in business
650+ credit score
Sufficient cash to flow to support repayments

4. LoanBuilder, A PayPal Service: Best Short-Term Working Capital

LoanBuilder

Get Started With LoanBuilder

Pros

Borrower qualifications are lower than banks
No extra fees
Application process is fast & easy

Cons

No long-term financing options

Why We Chose LoanBuilder For Best Working Capital Loan

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.

LoanBuilder Services

LoanBuilder offers short-term business loans of $5,000 to $500,000. Loans are repaid over 13 to 52 weeks.

LoanBuilder Rates & Fees

LoanBuilder does not use a traditional interest rate. Instead, it charges a one-time fee of 2.9% through 18.72% of the borrowing amount.

LoanBuilder Eligibility Requirements

LoanBuilder’s borrower requirements are as follows:

9 months in business
620+ credit score
$42,000 per year in revenue

5. Accion: Best For Working Capital Underserved Demographics

Accion

Pros

Borrower qualifications are lower than banks
Financing available for underserved markets
Monthly repayments

Cons

Some additional fees charged
Rates can be expensive

Why We Chose Accion For Best Working Capital Loan

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.

Accion Services

Accion offers small business loans up to $100,000 for eligible borrowers with repayment terms of up to five years.

Accion Rates & Fees

Accion’s rates range from 5.99% to 25.99%. Additional fees, such as closing costs and processing fees, may apply.

Accion Eligibility Requirements

Accion’s borrower requirements are as follows:

12 months in business (usually)
$50,000 per year in revenue

Get Started With Accion

6. BusinessLoans.com: Best Working Capital Market For Bad Credit Borrowers

BusinessLoans.com

Get Started With BusinessLoans.com

Pros

High borrowing amounts
No minimum credit score required
Fast & easy application process

Cons

Nontransparent rates & fees
Funding can take awhile to disburse

Why We Chose BusinessLoans.com For Best Working Capital Loan

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.

BusinessLoans.com Services

BusinessLoans.com works with lending partners to provide a wide variety of services, including:

Term loans
Short-term loans
Lines of credit
Merchant cash advances

BusinessLoans.com Rates & Fees

Rates and fees vary based on the lender and financial product you qualify to receive.

BusinessLoans.com Eligibility Requirements

BusinessLoans.com’s borrower requirements are as follows:

6 months in business
$100,000 per year in revenue

How Much Working Capital Does Your Business Need?

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 be using your assets to further invest in your business.

The Working Capital Ratio

One way to gauge your business’s efficiency and financial health is by using the working capital ratio. Here is the working capital formula:

Working Capital Ratio = Current Assets / Current Liabilities

Let’s say your company has $10,000 in current assets and $8,000 in current liabilities: 10,000 / 8,000 = 1.25, so your working capital ratio is 1.25.

But what does this number mean in terms of financial health?

Generally speaking, you want a ratio between 1.2 and 2.0. If your working capital ratio is lower than 1.2, it can indicate that you may have difficulty paying your bills and expenses on time. If your working capital ratio is higher than 2.0, you may not be investing in your company or in new growth opportunities as you should.

The working capital equation helps businesses find the sweet spot between paying existing debts and expenses while preparing for future business growth. This equation can also help you figure out how much you should seek to borrow when looking for a working capital loan.

Questions To Ask Before You Take Out A Working Capital Loan

You should never borrow money lightly. That’s why 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:

Have I Explored All Other Options?

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.

How Will I Use The Money?

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.

Will This Loan Put My Business In a Better Financial Situation?

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?

Do I Understand The True Cost Of This 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.

FAQs: The Best Working Capital Loans

Are working capital loans a good idea?

Working capital loans can be a quick and easy way to inject capital into a business that is facing short-term gaps in cash flow and may be struggling to pay operating costs. You will, of course, need to make sure your revenue can cover the rapid repayments required by most working capital loans.

How do you qualify for a working capital loan?

Working capital loans tend to be some of the easier business loans to qualify for. Though many do require a minimum credit score, the requirements can be quite low, even in the 500s. Working capital lenders will be concerned with your cash flow, however, as repayments are usually required frequently and immediately.

What are the disadvantages of working capital loans?

Working capital loans tend to have high interest rates and high-frequency repayment schedules. This can be burdensome for unprepared busineses.

Do you need collateral for a working capital loan?

While some working capital loans do require collateral, they are often unsecured loans. Be aware that even if you don’t need traditional collateral, you may be asked to sign a blanket lien or a personal guarantee.

In Summary: 7 Best Working Capital Lenders For Small Businesses

Lendio:
- Term loans, short-term loans, lines of credit, merchant cash advances
- FICO: No minimum
- APR: Varies by lender
OnDeck:
- Terms loans, lines of credit
- FICO: 625+
- APR: 29.9%+
SmartBiz:
- SBA loans, term loans, lines of credit, ERC refunds
- FICO: 650+
- APR 6.99%+
LoanBuilder:
- Short-term loans
- FICO: 620+
- Flat fee: 2.9%+ of borrowing amount
Accion:
- Term loans
- FICO: No minimum
- APR: 5.99%+
BusinessLoans.com:
- Term loans, short-term loans, lines of credit, merchant cash advances
- FICO: No minimum
- APR: Varies by lender

Bio
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Chris Motola

Senior Staff Writer at Merchant Maverick

Chris has been writing about small business topics since 2003. In 2015, he joined Merchant Maverick, where he writes about business financing, payment processing, and demographic trends in entrepreneurship. Chris has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.

View Chris Motola's professional experience on LinkedIn.

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1. Lendio

❮ ❯

Term loans, short-term loans, lines of credit, merchant cash advances
FICO: No minimum
APR: Varies by lender

2. OnDeck

❮ ❯

Terms loans, lines of credit
FICO: 625+
APR: 29.9%+

3. SmartBiz

❮ ❯

SBA loans, term loans, lines of credit, ERC refunds
FICO: 650+
APR 6.99%+

4. LoanBuilder

❮ ❯

Short-term loans
FICO: 620+
Flat fee: 2.9%+ of borrowing amount

5. Accion

❮ ❯

Term loans
FICO: No minimum
APR: 5.99%+

6. BusinessLoans.com

❮ ❯

Term loans, short-term loans, lines of credit, merchant cash advances
FICO: No minimum
APR: Varies by lender