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Best Working Capital Loans For Small Businesses In 2021

Advertiser Disclosure: Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity.

Working capital loans are one of the most versatile kinds of business loans you can get. Whereas equipment loans are restricted to (you guessed it) equipment purchases, working capital loans can be used to fund pretty much any aspect of your business. These are the loans you’ll seek if your needs don’t fall into a more specialized category.

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

CompanyBest ForNext StepsBest For
Lendio

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Best for easy working capital.
Best for easy working capital.

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SmartBiz

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Best for long-term working capital.
Best for long-term working capital.

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OnDeck

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Best for fast working capital.
Best for fast working capital.

Apply Now

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LoanBuilder

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Best for short-term working capital.
Best for short-term working capital.

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Accion

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Best for working capital for startups.
Best for working capital for startups.

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Other Featured Options:

Read more below to learn why we chose these options.

Best Working Capital Lenders For Small Businesses

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.

1. Lendio: Best For Easy Working Capital

Lendio



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Applying for loans can be a time-consuming task, especially if you’re not that familiar with the various lenders out there (and there are many). One way to get around having to do due diligence on multiple lenders is to use a loan aggregator like Lendio.

Lendio is a lending platform, meaning that they serve as a bridge between applicants and a pool of partnered lenders. 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.

Pros

  • Borrower qualifications are lower than banks
  • Multiple types of financing available
  • High borrowing amounts
  • Applicants can be quickly prequalified
  • Application process is fast and easy
  • Good customer service

Cons

  • Rates can be expensive
  • Funds can take a while to disburse

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2. SmartBiz: Best For Long-Term Working Capital

SmartBiz



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When it comes to long-term loans for small businesses, it’s hard to beat the terms of an SBA 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.

To qualify, you’ll need to have been in business for at least two years. You’ll also need a credit score of at least 640 for an SBA loan and 660 for a bank term loan. For an SBA loan, you’ll also need an E-Tran business credit score of at least 140. Bank term loans through SmartBiz can get you between $30,000 and $500,000 with a fixed interest rate of 6.99% to 24.99%. These have term lengths of 2-5 years. For SBA loans, check out our resources on the three types of SBA loans and SBA loan rates.

Pros

  • Excellent public reputation
  • Interest rates tend to be low
  • No prepayment penalty
  • Transparent terms and fees
  • Good customer service

Cons

  • Lengthy application process
  • Some additional fees

Get Started with SmartBiz

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3. OnDeck: Best For Fast Working Capital

OnDeck



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OnDeck is one of the older and more established online lenders, with a reputation for fast, versatile funding.

Through OnDeck, you can receive up to $250,000 to use as working capital for your business. OnDeck offers short-term loans and lines of credit for qualified borrowers. 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.

You can choose a financial product from OnDeck that works best for your business. For projects that have a fast return on investment, consider a short-term loan, which provides you with up to $250,000 that’s repaid over three to 18 months. This is ideal for updates to your business location, funding a marketing campaign, or covering seasonal expenses. If you want a more flexible financing option for covering gaps in revenue or unexpected expenses, OnDeck offers lines of credit up to $100,000 with APRs starting at about 11% for qualified borrowers.

Pros

  • Borrower qualifications are lower than with banks
  • Multiple types of financing available
  • Lower costs for repeat customers
  • Funds are disbursed quickly

Cons

  • Not available in some states
  • Rates can be expensive
  • Low borrowing amounts

Get Started with OnDeck

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

LoanBuilder



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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.

LoanBuilder’s calling card is quick and easy financing with a simple fee model. You can borrow between $5,000 and $500,000 through LoanBuilder with a flat fee of 2.9% – 18.72%. There’s no origination fee or additional costs so long as you make payments on time. Term lengths range from 13-52 weeks. To qualify, you need a credit score of 620, nine months in business, and a minimum annual revenue of $42,000.

While LoanBuilder’s rates are quite good for short-term loans, you are required to sign a blanket lien, so make sure you know what you’re walking into.

Pros

  • Borrower qualifications are lower than banks
  • No extra fees
  • Application process is fast and easy
  • Funds get disbursed quickly

Cons

  • Not available to businesses in some industries
  • No discounts for repaying early
  • No long-term financing options available
  • A blanket lien is required

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5. Accion: Best For Working Capital For A Startup

Accion



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One of the hardest positions to be in as a prospective business loan borrower is to need money while not having enough business history to meet borrower qualifications. This is the position startups often find themselves in. But while it can be difficult to get financing as a startup, lenders like Accion still make it possible.

Accion is a non-profit lender specializing in business loans to under-served populations and business types. Borrower qualifications vary by state, but they’re far more relaxed than you’ll typically find in the industry. You just need a 550 credit score (575 in some states) and sufficient cash flow to repay the loan. Startups specifically also need to have less than $3,000 in past-due debt, a business plan, and a referral from one of Accion’s partners.

You can borrow between $300 – $250,000 through Accion, at an APR between 7% – 34%. Origination fees range between 3% and 5%. Repayments are made monthly.

Pros

  • Borrower qualifications are lower than banks
  • Financing is available to qualified startups
  • Monthly repayments
  • Fast and easy application process
  • Customer service is helpful

Cons

  • Rates can be expensive
  • Some additional fees charged

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6. Fundera: Best For Unsecured Working Capital

Fundera by NerdWallet



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It’s common to think of loans in terms of collateral, but the truth is that unsecured business loans are more or less the norm in the online lending market. These loans instead use cash flow to determine eligibility. Just be aware that even though these loans are unsecured, that doesn’t mean your creditor won’t go after your assets should you default.

Since they’re so common, a good way to find an unsecured business loan that fits your needs is to use an aggregator service like Fundera. Fundera will shop your application around to its member lenders and find you matching offers.

Because Fundera itself doesn’t directly lend, the company doesn’t have any hard borrower qualifications. However, if you submit an application and aren’t eligible for the types of loans you apply to, Fundera offers an eligibility tracker so you can see what you do qualify for. Fundera does not charge the applicant for using the service, though it’s possible some of the costs it charges the lender may be passed onto you.

Pros

  • Multiple types of financing available
  • Helpful customer service
  • Transparent communication and pricing

Cons

  • Rates can be expensive
  • Some additional fees charged

Get Started with Fundera by NerdWallet

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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?

According to Investopedia, 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 borrow in 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 getting the best deal.

Our free small business loan calculators can help you fully understand the rates and fees associated with a loan.

In Summary: Best Working Capital Lenders For Small Businesses

  1. Lendio: Best for easy working capital.
  2. SmartBiz: Best for long-term working capital.
  3. OnDeck: Best for fast working capital.
  4. LoanBuilder: Best for short-term working capital.
  5. Accion: Best for working capital for startups.
  6. Fundera by NerdWallet: Best for unsecured working capital.
Chris Motola

Chris Motola

Finance Writer at Merchant Maverick
Chris Motola is a writer, programmer, game designer, and product of NY. These days he's mostly writing about financial products, but in a past life he wrote about health care and business. He's a graduate of the University of Central Florida.
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2 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Anthony Turnage

    Checking on my loan

      Jessica Dinsmore

      Hi Anthony,

      We don’t have the ability to check your loan status, so you’ll want to reach out to your lender for assistance on that.

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      We Recommend OnDeck for Loans 🏆

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      Low requirements: 600+ credit score, 12+ months in business and $100,000+ revenue.

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      Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity. The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author’s alone.

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