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When businesses are short on money for daily operations, they may need to look into working capital loans to keep things running. Working capital loans are short-term infusions of cash to help companies afford expenses like payroll, rent, utilities, and other costs of doing business.
These loans—which can be fixed rate loans, lines of credit, or merchant cash advances—do come with a cost, however. It’s important to do your research to find a lender with a favorable rate and terms for your needs. Below, we’ve done the investigation for you and developed a list of the best working capital loans for different business situations.
Best Working Capital Loans of 2023
- Best for Amex Customers: American Express Business Line of Credit
- Best for Merchant Cash Advances: Credibly Merchant Cash Advance
- Best for SBA Loans: Citi SBA Loans
- Best for Quick Cash: Bluevine Line of Credit
- Best for High Loan Balances: Rapid Finance
- Best for Young Businesses: Fundbox Line of Credit
Best for Amex Customers : American Express Business Line of Credit
- APR Range: 2%–9% for 6-month loans; 7.5%–18% for 12-month loans; 15.75%–27% for 18 month loans
- Loan Terms: 6 to 18 months
- Loan Amounts: $2,000 to $250,000
Pre-approval for Amex customers without hard credit pull
Revolving credit provides flexibility
Manage account online or on mobile app
No origination fees
Not for those with bad credit
Must be in business for at least one year
May be tempted to draw more than you need
Late payment fees
Formerly Kabbage Funding, American Express Business Line of Credit provides business owners with a financial lifeline that they can tap into as needed.
If you’re already an Amex customer, the application process will be easier for you since Amex will pull from your existing file to determine if you qualify for the product. You can even pre-qualify without an impact on your credit.
Amex determines the credit line amount based on your personal and business credit reports, average monthly revenue, time in business, transaction volume, and other factors. Each time you draw on the account, it generates a loan and applies a fee—you’ll have to pay back the amount within a set term. The fee can be as low as 2% or high as 27% depending on your personal and business creditworthiness and the loan term. Funds take 1 to 3 business days to post to your business bank account.
- Minimum credit score/range: 640
- Minimum income: Average monthly revenue of $3,000
- Employment qualifications: Must be at least 18 years old, in business for 12 months or more, and have a business bank account
- Availability: All 50 states and Washington, D.C.
Best for Merchant Cash Advances : Credibly Merchant Cash Advance
- Factor Rate: 1.09 to undisclosed maximum
- Loan Terms: 3 to 18 months
- Loan Amounts: Minimum not disclosed; maximum $400,000
Accessible to those with poor business credit
Same-day approval and funding as soon as two days
Transparent and well-rated for customer service
Underwriting, prepayment, and administrative fee
Generally more expensive than other loan types
Must have $15,000+ average monthly bank deposits
For some businesses, qualifying for a business loan or line of credit just isn’t possible if they don’t have a satisfactory credit score. A merchant cash advance could be a good solution as you’ll get access to the funds you need very quickly to keep your business operating. Credibly makes the process quick and easy, and is very transparent about its costs and how it works. In fact, it has strong customer service ratings, which can be tough to achieve as a nontraditional lender.
The way it works is Credibly will collect a percentage of your daily credit card sales until the amount borrowed plus the factor rate is paid back. The downside is that merchant cash advances are an expensive way to borrow money, and if you don’t qualify for the lower end of the factor rate range, the cost can be substantial.
Don’t get factor rate confused with interest rate. A factor rate is multiplied by the amount borrowed to represent the total cost. So a $10,000 advance with a factor rate of 1.2 will cost $12,000 (plus other applicable fees). However, it’s applied up front, unlike an interest rate, which continues to be applied over the life of the loan.
- Minimum credit score/range: 500+
- Minimum income: $15,000+ average monthly bank deposits
- Employment qualifications: 6 months in business
- Availability: States of operation are not disclosed
Best for SBA Loans : Citi SBA Loans
- APR Range: 5.75%–11.25%
- Loan Terms: 84 months to 7 years
- Loan Amounts: $5,000 to $5,000,000
SBA loans are possible even with bad credit
Citi has big bank name recognition
Not many loan details are disclosed on the site
Origination fee up to $250
Poor customer service rating
Citi is a Small Business Administration (SBA) Preferred Lender, meaning it can offer loans to small businesses of up to $5 million. There isn’t much information about the loan process disclosed online and there’s no way to get pre-qualified or see rates. Instead, you must enter your contact information to initiate a phone call with a loan officer.
That said, if you’d prefer to work with a big name bank to take advantage of the SBA loan program, or if you’re already a happy Citi customer, Citi’s small business loan is worth exploring.
Loans that are backed by SBA tend to have competitive rates and other benefits.
- SBA loans can be used for operating capital and other business needs.
- Minimum credit score/range: Not disclosed
- Minimum income: Not disclosed
Best for Quick Cash : Bluevine Line of Credit
- APR Range: 6.2% to undisclosed maximum
- Loan Terms: 6 to 12 months
- Loan Amounts: $5,000 to $250,000
No fees for opening, maintaining, or prepayment
Online credit decision in just a few minutes
Business must be at least two years old
Not available to customers in Nevada, North Dakota, and South Dakota
Bluevine is a fintech company that specializes in business financial services, including small business lines of credit. We like its guide to applying for its lending products and its extensive library of content to answer any questions small business owners may have.
Bluevine is also transparent about its rates, fees, requirements, and what the application process requires, so you have a good idea up front if it’s worth applying. And, despite being a fairly new player in the space (it was founded in 2013), it has strong customer ratings.
- Minimum credit score/range: 625 personal FICO score
- Minimum income: $40,000 in monthly revenue (must link to your business checking account or provide statements from the last 3 months)
- Employment qualifications: 24+ months in business
- Operates in 47 states
Best for High Loan Balances : Rapid Finance
- APR Range: Not disclosed
- Loan Terms: 3 to 60 months
- Loan Amounts: $5,000 to $1,000,000
Credit requirements are flexible
Strong customer ratings
Loans up to $1 million
Rates are not disclosed
No details about qualifications listed
Rapid Finance is an alternative lender that gets high praise from its small business customers online. The application process is completely online and moves quickly, which is appealing if you’re looking to get your funds ASAP.
If your credit is not super strong, Rapid Finance may not hold it against you as long as your financials demonstrate the health of your business. This can make it a more flexible option than more traditional lenders, including applying for a loan that puts up assets as collateral.
- Minimum credit score/range: Not disclosed
- Minimum income: Not disclosed
- Employment qualifications: Not disclosed
Best for Young Businesses : Fundbox Line of Credit
- APR Range: Not disclosed
- Loan Terms: 12 weeks, 24 weeks, other terms not disclosed
- Loan Amounts: Minimum not disclosed; maximum $150,000
Quick application decisions in a few minutes
Can apply without hard credit pull
Only 6+ months in business required
Costs of borrowing may be higher
Loan details and rates not disclosed
Weekly repayment terms may be tough to swing
Fundbox offers fast funding after completing an online (or app) application for small businesses seeking a business line of credit. Unlike many other business lenders, applicants only have to be in business for six months and have $100,000 in annual revenue in order to qualify, making it a good choice for newer entrepreneurs.
Like other lines of credit, the cost could be higher than traditional loans, but there is flexibility in that you only have to borrow what you need. Customer ratings are mostly positive.
- Minimum credit score/range: 600+
- Minimum income: $100,000 in annual revenue
- Must be in business at least six months
Overall, choosing the right lender for your working capital loan comes down to your business financial needs, the age and health of your business, and your creditworthiness. For a traditional loan, Citi SBA Loans or Rapid Finance offer large amounts. But if you’re looking more for a revolving credit line that provides you with cash if needed, American Express or Bluevine are two viable options with easy applications and fast funding.
Business owners who don’t have great credit or haven’t been in a business a long time can look to alternative lenders like Fundbox or Credibly (which offers a cash advance option).
Guide to Choosing the Best Working Capital Loans
What Is a Working Capital Loan?
A working capital loan allows businesses to borrow money for everyday and short-term operations. It can help companies when they are short on liquidity or have a slower revenue period by infusing cash into the business.
Types of Working Capital Loans
- Term loans: These provide businesses with a lump sum of cash that they agree to pay back according to agreed-upon terms.
- Lines of credit: This allows a business to draw from available funds as needed. It is a revolving credit line, meaning that after you pay it back, you can tap into it again.
- Factor loans: These are short-term loans that apply a factor rate to the principal to determine the full payback amount. A factor loan of $10,000 with a 1.3 factor rate means the business will pay back $13,000 (10,000 x 1.3).
- Merchant cash advance: Technically not a loan; with a cash advance, you get a lump sum and then the lender—usually your credit card payment processor—takes a small percentage of your revenue each day until your obligation, plus fees, is met.
The advantage of having a revolving credit line is that you only have to borrow what you need, and after you’ve paid it back, you can use it again without having to reapply. Lines of credit may have higher fees than business loans with fixed payments, however.
Factors to Consider When Choosing a Working Capital Loan
If you’re in need of working capital and are considering a loan, this is what you need to think about:
- The interest rate: This is the percentage of your principal that is tacked on to the total cost of the loan.
- Business credit history: Along with your personal credit status, lenders may run your business credit to determine if you qualify and your rate.
- Amount needed for business operation: Determining how much you need to borrow is important so that you’re not borrowing too much (and paying interest on that higher amount) or not enough.
- Term length of the loan: Making sure you have adequate time to pay back your loan is important. But keep in mind that the longer the term, the more you’ll pay in interest overall.
- Whether the loan is secured or unsecured: Secured loans mean you have to put up collateral, like your business assets, in case you stop making payments. Unsecured loans do not require collateral, but may have a higher credit score requirement to qualify.
How to Apply for a Working Capital Loan
The application process for a working capital loan can vary by lender, but in general, the basic steps are the same.
- First, determine how much working capital you need. Your net working capital is your current assets minus your current liabilities.
- Next, review your personal and business credit history and go over your financials to see if they meet the minimum requirements of working capital lenders.
- When you select the best lender for your needs, be ready to submit documentation for underwriting, which will include business bank account statements and other business financial information.
- Once approved, you will get a closing date and the funds will be disbursed.
Frequently Asked Questions
Do You Pay Interest on Working Capital Loans?
Most working capital loans do incur interest, and rates can go well into the double digits depending on your business credit situation, how much you’re borrowing, and other factors. With working capital lines of credit, you may pay a fee that is a percentage of your loan amount instead.
How Long Does a Capital Loan Last?
Capital loans can last anywhere from one month to a few years depending on the lender and the type and amount of the loan. They are meant to be short-term loans, but larger amounts might require you to choose a longer term, so you can manage the repayment.
When Is a Working Capital Loan Necessary?
Working capital management may be necessary to pay your rent and utility bills, meet payroll, and pay vendors—those essential elements of running your business. If a business finds itself falling short, then a working capital loan might be a good financial option to bridge the gap.
Can You Get a Working Capital Loan With Bad Credit?
It is possible to get a working capital loan if you have bad credit, but you will most likely pay a higher interest rate or have to put up collateral such as equipment or assets. You may also have to broaden your lender search beyond traditional banks to find an alternative lender that specializes in loans for businesses with bad credit.
Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of business loan lenders. To rate providers, we collected hundreds of data points across more than 30 lenders, including interest rates, fees, loan amounts, and repayment terms, to ensure that our reviews help users make informed decisions for their borrowing needs.
U.S. Chamber of Commerce. “What Is a Working Capital Loan?”
Bank of America. “What Is Working Capital—and Why Is it Important?”