Funding types

Working capital loans: how they work, who qualifies and when they make sense

Working capital funding covers the money a business needs to run day to day: payroll, inventory, rent and the gap between paying bills and getting paid.

Best for: Inventory, payroll, seasonal gaps
Speed: Often days
Credit: Fair credit and up; revenue matters most
Repayment: Fixed daily, weekly or monthly payments
Collateral: Usually unsecured

Every business has a gap between money going out and money coming in. A restaurant buys food before diners pay. A contractor pays crews before the customer's check clears. Working capital funding fills that gap so the business can keep operating and take on more work.

How it works

You receive a lump sum and repay it over a set term, often a few months to a year or two, usually with fixed daily or weekly payments drawn from your business account (some lenders offer monthly payments). Many working capital products are unsecured, meaning you don't pledge specific collateral, though a personal guarantee is common.

Good uses

Stocking inventory before a busy season
Covering payroll during a slow stretch
Taking on a large order or contract
Bridging the wait for customer payments
Short-term marketing pushes with a clear return

What lenders look at

Monthly revenue and consistency of deposits
Time in business
Recent business bank statements
Credit (weighed differently by each lender)
Existing debts

Working capital vs. a line of credit

A working capital loan gives you the full amount at once with a fixed payoff. A line of credit lets you draw only what you need, when you need it. If your needs are one-time and specific, a lump sum is simple. If they come and go, a line of credit is often cheaper.

Questions owners ask

How fast can I get working capital?

With online and alternative funders, decisions often come within a day and funding within a few days once documents are in. Banks take longer.

Is working capital funding taxable income?

Loan proceeds generally aren't income, but tax treatment depends on the product and your situation. Ask your accountant.

All business funding options › · Calculators ›

General information, not financial or legal advice. Terms vary by lender and business.

Industries that use this most

Each page below covers what that industry borrows for, how many independent businesses of that kind are operating, and what an underwriter looks at in that sector.

If you need working capital and the timing matters, the practical next step is an actual offer rather than more comparison. Merchant Fund Express reviews three to six months of bank statements, underwrites in house, and comes back with a real number and a real payment schedule instead of selling your file to a dozen funders who will all call you.

Merchant Fund Express is a partner of The Company Chronicle. Funding subject to approval.