How to Get Working Capital Loans for Small Business (2020)


In this post, I’m going to show you EXACTLY how to get working capital loans for small business in 2020.


In fact, this process has helped so many small business owners maintain a sustainable cash flow management system over the past years.

Plus: working capital loans for small business with bad credit, the various types of working capital loans, and more.

And in today’s post, I’ll show you exactly how to get this done.

What is Working Capital?

We can define working capital as the overall difference between an organization’s current assets such as cash, accounts receivable (customers’ unpaid bills) and inventories, and its current liabilities such as accounts payable.

And we can define net working capital as a measure of the organization’s liquidity, that is, the difference between its OPERATING current assets and OPERATING current liabilities.

Business working capital is an important factor to consider when trying to maintain a sustainable cash flow management system.

Working capital is one of the many metrics that investors use to evaluate a company's stock and judge its financial health and future prospect! Share on X

To get working capital loans for small businesses may just be the smartest move when trying to get that business the cash it needs to cover daily operational expenses.

Working capital loans can provide a lifeline for small businesses that experience a dip in sales, like landscapers, ski resorts, and small retailer stores.

Although this kind of loan isn’t usually considered as the best solution for long-term business expansion or financing, it still goes a long way to sustaining your business for the short term.

How Does Working Capital Loans for Small Businesses Work? 

No business can function without the funds to hire staff, purchase inventories, and get the word out to their customers through paid advertisement!

And when your business lacks the necessary funds to carry out these functions, it’s best to go get a working capital loan.

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These working capital loans are known to finance a business’s short-term expenses. This includes operational costs such as restocking inventory, payment of rent, payroll, etc.

They can’t be used for long-term such as equipment loans and loans for real estate, etc.

These are one of the easiest loans to get since they have the least requirements. Your working capital loan requirements depend on the loan type and your lender’s preferences

A working capital loan can be either secured or unsecured and could range from $5,000 to $500,000.

#1: Secured Working Capital Loans

Getting a secured working capital loan may require some form of collateral from you (the business owner. But to substitute for the collateral, high-interest rates may be put in place in the loan term to compensate the lending institution for any risk involved.

A secured working capital loan is meant for small business owners with bad credit, or no credit at all, and are also tied to his or her personal credit.

#2: Unsecured Working Capital Loans

Getting an unsecured working capital loan is basically for business owners with a high credit rating, and here, collateral is not required to secure the loan.

Best Working Capital Loans for 2020 

A working capital loan could be of any of these 4 types:

  • Short-term small business loans
  • Business lines of credit
  • Invoice financing
  • SBA

#1: Short-Term Small Business Working Capital Loans

This type of working capital loan provides small business owners capital upfront that is to be paid back within a short period of time (usually not less than a year) with fixed, equal payments.

#2: Business Lines of Credit

A working capital loan that offers small business owners with a line of credit is in a way more flexible than short-term loans. Business owners are allowed access to funds up to a certain credit limit and are to only pay interest on what was borrowed.

These loans are quite difficult to get though!

#3: Invoice Factoring

This type of small business financing helps business owners convert their slow-paying invoices into fast working capital.

Invoice factoring is one-way small business owners can use to get payment upfront on an invoice, where a factor buys the invoice and is placed in charge to collect payment from customers.

#4: SBA Loans

These are government loans guaranteed by the U.S Small Business Administration and issued through credit unions, online lenders, and participating banks.

They provide up to $5 million of working capital financing for small businesses, expansion, or equipment purchases.

Small business owners can also get a working capital loan in the form of trade of credit. This only happens if the business owner has a good credit term and relationship with vendors and suppliers.

With this, they can negotiate payment terms, fund large orders to ramp up a new contract, and many others.

How to Get Working Capital Loans for Small Business

There are so many online lenders one can choose to get working capital loans for small business with.

Here are some of the best working capital loans for small business:

#1: LoanBuilder by PayPal

With LoanBuilder, which is a PayPal service, small business owners can get a working capital loan between $5,000 and $500,000.

This is a one-time loan that is being paid back with additional interest, usually every week over a short-term (13 weeks or as long as 52 weeks).

>>MORE: LoanBuilder working capital loan

The interest rate spans between 2.9% to 18.72% of the total loan amount approved, and you need at least nine months of business history to qualify for a LoanBuilder working capital loan.

You are also required to have a credit score not less than 550 and an annual revenue not less than $42,000.

#2: Kabbage Working Capital Funding

The online platform allows you to get working capital loans for small business up to $250,000 (typically from $2,000 – $250,000).

The payment terms for Kabbage funding is more of a long term if compared to that of LoanBuilder in the sense that, small business owners can get a working capital line of credit and payback in the next 12 to 18 months.

And it’s much easier to get a working capital loan with Kabbage funding than with LoanBuilder because the platform doesn’t just rely on your credit score or history to determine your eligibility.

>>MORE: Kabbage working capital loan

But still, small business owners are required to have about $50,000 of annual revenue with at least one year of business history. Its interest rates range from 1.5% to 10% of the total loan approved.

This is one of the best working capital loans for small business with bad credit as there are no minimum credit score requirements.

#3: OnDeck Working Capital Loan

Its loans range from $5,000 to $500,000 and can be approved as quickly as 24 hours. It also offers both a short-term working capital loan and a business line of credit.

OnDeck is not really a working capital loan for small businesses with bad credit, so to say, as they require your credit score rating to approve your loan request.

>>MORE: OnDeck working capital loan

You will also be required to provide your business cash flow statement, and a notice to know whether or not you’ve borrowed funds from the platform before.

Finally, in terms of credit score, small business owners are required to have a credit score of at least 600 and annual revenue of $100,000 to get their loan request approved.

OnDeck has an annual interest rate of at least 9.99% of the total loan amount approved.

#4: BlueVine Working Capital Loan

BlueVine working capital loans come in two forms:

  • A business line of credit
  • Invoice financing

BlueVine loan terms vary based on which of the two forms you choose.

>>MORE: BlueVine working capital loan

While a business line of credit will allow your business to access revolving credit which you can gradually pay over time, invoice financing will provide you with a one-off advance for your business’s outstanding invoices.

BlueVine working capital loan is basically for small business owners who have capital tied up due to customer credit or unpaid invoices and require money to cater to the business daily operation.

#5: Fundbox Working Capital Loan

They offer working capital line of credit from $1,000 to $100,000, with a period of 12 to 24 weeks to repay back the loan debt.

Fundbox is one of the online lenders to get working capital loans for small business very quickly; as fast as just a few minutes!

>>MORE: Fundbox working capital line of credit

Small business owners are required to have about $25,000 of annual revenue with a credit score of at least 500 to get their loan request approved.

The business must also have at least a 3 months business history.

Fundbox can be considered as one of the best working capital loans for small business with bad credit.

#6: American Express Merchant Working Capital Loan

They only offer loans to small businesses that process American Express credit card transactions from customers.

Their loans range from $5,000 way up to $2 million!

>>MORE: Amex working capital financing

Amex interest rates are repaid via a percentage of the business owner’s credit and debit card transactions. But still, their interest rates range from 3% to 28% of the total loan amount.