What is a Working Capital Loan?

A working capital loan is designed to cover a business’s short-term operational expenses—essentially the cash needed to keep the lights on and the wheels turning. It’s used to manage day-to-day costs when cash flow gets tight or to seize quick opportunities, not typically for long-term investments like equipment or real estate. Here’s the gist:

• Purpose: Funds things like payroll, rent, inventory, or supplier payments—basically, the stuff that keeps a business humming between revenue cycles.

• Structure: Usually a short-term loan (usually 6 to 24 months), repaid in fixed installments or as a lump sum, depending on the lender.

• Amounts: Amounts vary widely—$5,000 to $500,000 or more—based on the strength of the business..

• Key Trait: It’s tailored to the cash flow profile of the applicant business, ensuring payments remain affordable despite its short-term nature.

• Pros: Fast access to cash, no equity given up. Cons: Interest rates are higher than long-term loans, and frequent borrowing might signal deeper issues.

Think of it as a buffer for businesses with seasonal dips or uneven cash flow—like retailers stocking up before the holidays or medical offices dealing with slow A/R.