Loan type
Working capital loans: a category, not a product, and how to shop it
"Working capital loan" is a use case that six different products claim. Here is the whole menu, ranked by what it actually costs.
At a glance
| What it means | Financing for operating expenses rather than for an asset |
|---|---|
| Typical amount | $10,000 to $500,000 |
| Rate | 9.0% - 50.0% APR — the widest range of any category on this site |
| Term | 3 months to 10 years depending on which product you use |
| Speed | Same day to 90 days |
| Collateral | Varies from none to a full blanket lien |
A good fit when
You have a timing gap between money going out and money coming in, and you can name the specific cause.
A poor fit when
You cannot name the cause. Borrowing against an unexplained shortfall is how businesses end up with four advances.
Diagnose before you shop
Working capital problems come in three shapes, and each one has a right answer and several expensive wrong ones.
- A timing gap
- You do the work in March and get paid in June. Nothing is wrong with the business; the calendar is just against you. Right answers: a line of credit, invoice factoring, or AR financing.
- A growth gap
- Every new customer costs cash before it produces cash, so growing makes you poorer before it makes you richer. Right answers: a line of credit sized to your growth, or a term loan if the investment is discrete.
- A structural gap
- You are not profitable at current volume. Borrowing does not fix this and every product on this page makes it worse. Right answer: pricing, cost structure, or a hard conversation — not financing.
The full menu, cheapest first
| Product | Typical cost | Speed | Realistically available to |
|---|---|---|---|
| SBA 7(a) | 10.0% - 14.0% APR | 30 to 90 days | 2+ years, 680+ credit, positive cash flow |
| Bank line of credit | 9% to 16% APR | 2 to 6 weeks | 2+ years, banking relationship |
| SBA Express line | 11.0% - 15.0% APR | 2 to 4 weeks | Same as 7(a), under $500k |
| Invoice factoring | 1% to 5% per 30 days | 3 to 10 days | Anyone invoicing creditworthy businesses |
| Online line of credit | 20% to 60% APR | 1 to 3 days | 6+ months, $100k+ revenue |
| Online term loan | 20% to 45% APR | 1 to 3 days | 6+ months, 600+ credit |
| Merchant cash advance | 40% to 350%+ effective | Same day | Almost anyone with card or bank revenue |
The question that saves the most money
Before you take any of these, ask: how much of this gap can I close without borrowing?
- Invoice faster. Businesses routinely invoice at month end out of habit. Invoicing on completion pulls cash forward by two to four weeks at zero cost.
- Ask for a deposit. Fifty percent up front is normal in far more industries than people assume.
- Negotiate supplier terms. Net-45 from a supplier is free financing. Most suppliers would rather extend terms than lose the account.
- Chase the aging. A surprising share of "cash flow problems" are actually a collections problem with two or three specific customers.
- Take the early-pay discount only when it beats your borrowing cost. 2/10 net 30 is roughly a 36% annualized return on paying early. If your line costs 12%, take it. If you are on an MCA, do not.
Questions people actually ask
What is the easiest working capital loan to get?
A merchant cash advance, which is precisely the problem — ease and cost move together. If your customers are other businesses, invoice factoring is nearly as easy and costs a fraction as much, because it is underwritten on your customers rather than on you.
Can I use an SBA loan for working capital?
Yes. A 7(a) can fund working capital with an amortization of up to ten years, which is longer than almost any conventional lender will write. That long amortization is the single strongest argument for enduring the SBA paperwork.
How much working capital should I borrow?
Model it from the gap, not from what you are offered. Build a thirteen-week cash forecast, find the deepest point, and add a buffer of roughly 20%. Borrowing more than that means paying interest on money that sits idle; borrowing less means going back for a second facility, which is more expensive than sizing it right the first time.