The Ultimate Guide To Working Capital Loans

Camino Financial01 Feb 2024
The Ultimate Guide To Working Capital Loans
A working capital loan can help you if you experience financial instability. With access to funds, it'll be simple to ensure everything runs smoothly in your business. Thanks to this post, you'll be able to decide whether to get this type of loan to put your business on a more solid financial foundation. You'll learn how to get them, the requirements, and more.
Table of Contents
1. Best working capital loans
2. Tips for comparing working capital loans
3. Average interest and fees
4. Most common requirements
5. How to apply for working capital loans
6. What are working capital loans?
7. Pros and cons
8. Uses of working capital loans
9. Types of working capital loans
10. How to improve your working capital: 10 tips
11. Should I get a working capital loan? 
12. A loan for working capital can change your business's future
13. Frequently asked questions

Best Working Capital Loans

Camino Financial

camino financial logo Camino Financial supports small business owners.

Our business loan amounts range from $10,000 to $50,000.

We offer fixed interest rates and monthly payments, and you can use the funds to strengthen your working capital.

The best thing is that we don't require collateral as part of the loan process, and you can apply even if you don't have a previous credit history.

The minimum criteria you need to meet to pre-qualify are:
  • Have been in operation for at least 12 months
  • Earn $2,500 in average monthly revenue or $30,000 per year
  • Have an SSN
  • Be located in the US except for New Jersey, Hawaii, and Puerto Rico
Apply for a business loan today


SBA logo The SBA CAPLines program offers four types of business lines of credit:

Seasonal Line

It's perfect for businesses with periodic sales activity fluctuations due to seasonal demand changes. The maximum line amount is $5 million, and the maximum term is 36 months.

Contract Line

Provides financing to businesses that have government contracts or other long-term contracts in order to help them meet the performance requirements of those contracts. The maximum line amount is $5 million, and the maximum term is 60 months.

Builders Line

Provides financing to small builders and contractors for inventory and other costs associated with new construction projects. The maximum line amount is $5 million, and the maximum term is 36 months.

Working Capital Line

They finance small businesses for their ongoing working capital needs. The maximum line amount is $5 million, and the maximum term is 60 months.


credibly logo Credibly also offers a line of credit, which you can use for business expenses like inventory or equipment purchases. The loans are repaid through a percentage of daily credit card sales, which makes repayment easy and flexible for businesses. Businesses must have been in operation for at least six months and have a minimum monthly credit card sales volume of $5,000 to qualify for a loan from Credibly. There are no restrictions on how businesses can use the loan funds, so you can use them for any business purpose.


lendio logo Lendio makes it easy for small businesses to find the right loan by matching them with the best lender for their needs. Lendio offers a variety of loans, including working capital loans, equipment loans, lines of credit, and SBA loans.
  • Businesses must have been in operation for at least six months and have a minimum monthly revenue of $5,000 to qualify for a working capital loan through Lendio.
  • Lendio also requires that businesses have a personal credit score of 550 or higher and a business credit score of 650 or higher.
  • Repayment terms for working capital loans through Lendio range from three to 36 months.

Fora Financial

fora financial logo Fora Financial working capital solutions give you the flexibility and funding you need to reach your goals. They offer a variety of financing options, including short-term loans, lines of credit, and merchant cash advances. They also have a wide range of repayment terms to fit your needs. All the financial products are for businesses that have been in operation for at least six months and have a minimum monthly revenue of $10,000. Businesses must have a good credit history and a strong financial track record to qualify for Fora Financial Working Capital. You must also be able to demonstrate a need for the funds and how you will use them to grow your business.


fundbox logo Fundbox offers working capital loans to small businesses in the United States. Businesses must have been in operation for at least six months and have a minimum annual revenue of $50,000 to be eligible for a loan. Loan amounts range from $1,000 to $100,000, and repayment terms range from 12 to 24 weeks. Fundbox charges a flat fee for its loans, which is typically between 10% and 15% of the loan amount. There are no prepayment penalties or hidden fees. To qualify for a loan, your business must:
  • Be in business for at least 3 months
  • Have a gross revenue of at least $50,000 per year
  • Have an active bank account
  • Use invoicing software such as QuickBooks or Freshbooks (or have manual invoices that you can upload)

Tips For Comparing Working Capital Loans

  • Know Your Needs. Before comparing loans, knowing how much money you need and what you'll use it for is important.
  • Compare Loans. Pay attention to things like loan amounts, repayment terms, interest rates, and fees.
  • Compare The Total Cost Of The Loan. Not just pay attention to the business interest rate, make sure to compare origination fees, prepayment penalties, and other charges that can add up.
  • Read The Fine Print. Pay attention to repayment terms, grace periods, and hidden fees. By understanding the loan agreement, you can avoid any unpleasant surprises.
  • Consider Your Collateral. If you have collateral to offer, it may make sense to choose a lender that requires it, as they may offer better terms.
#DidYouKnow Unsecured working capital loans are a type of loan that is not backed by any form of collateral. This means that if the borrower fails to repay the loan, the lender cannot seize any assets of the borrower in order to recoup their losses.

Average Interest And Fees

Lenders offer working capital loans with APRs ranging from 6.99% to 90%. Some charge an origination fee that averages 1.5% of the loan amount, while others do not. Because each applicant's situation is different, the terms you get will vary.
#DidYouKnow The APR includes the interest rate, origination fee, and other closing costs.
Lenders charge an APR equal to their perceived risk. Therefore, applicants with the best financial history receive the best APR and repayment terms.

Most Common Requirements

Be aware of common lender requirements such as these:
  • Minimum credit score: A loan approval requirement could be on the low side of 550 or in the higher range between 725 and 800 for personal credit or a business credit score between 49 and 100.
  • Annual Revenue: Requirements can range from $2,500 to $10,000 or more.
  • The number of years in business: Most lenders require that you've been in business for at least 1 to 2 years.
  • Fees: Depending on the loan type and lender, you could pay origination, late payment, documentation, processing, and other fees. Some lenders charge a prepayment penalty if you pay a loan off early. On the other hand, some lenders offer early payoff discounts.
  • Repayment terms: Short-term repayment terms increase the monthly payment but reduce the overall interest you repay. Longer payment terms do the opposite. Lenders may require daily, weekly, bi-monthly, or monthly payments.
#CaminoTip If you have a low credit score, start by getting a smaller amount and making timely payments. Then you'll be able to qualify for a future more considerable loan amount with better terms.
Unlike other lenders, at Camino Financial, we have minimal requirements that are easy to meet. Apply For A Business Loan!

How To Apply For Working Capital Loans

  • Know What Loan Amount You Can Afford. Choose an amount with comfortable repayment terms.
  • Research Different Lenders. List banks, financial institutions, and online lenders. Then, compare their requirements.
  • Compare Them. Pay attention to TrustPilot scores and other types of ratings. These indicate how pleased customers are with each lender's service.
  • Choose A Working Capital Loan Company. Then, select a lender that matches your business needs. At Camino Financial, we have minimal requirements, and we're known for our top-notch customer service.
  • Prepare Your Documents. Lenders typically ask to see:
    • bank statements
    • personal and business tax returns
    • business financial statements
    • copies of permits and licenses
    • SSN, ITIN, or EIN
    • proof of residence (utility bill)
    • list of collateral items you own (if it's a secured loan)
  • Fill Out An Application. Provide the requested information and submit your form. A Camino Financial loan application won't take you more than 10 minutes.
  • Get Pre-Qualified. Lenders may notify you instantly that you are pre-qualified for a loan, but some do not. Contact their customer service staff if you haven't heard anything in a couple of days.
  • Complete The Lending Process. The lender might require some more information and documents to approve your loan. They might also require you to connect your bank account to apps like Plaid to review your cash flow.
  • Get Funded. Once approved, the lender will send the loan offer for you to sign and return. Then, you will have the loan proceeds deposited into your bank account.
Apply for a business loan today
#CaminoTip The working capital lending company you choose should have a customer service team you can contact if you have questions before, during, and after the loan process.

Follow these tips before applying

  • Pay down debt before applying. You want your financial records to be in the best shape possible before applying for a loan. That means your financial records indicate that you pay your bills on time and make regular payments to pay off short and long-term debt.
  • Don't apply for a loan unless you have the means to repay it. Lenders look at your debt-to-income ratio to determine your ability to make future loan payments.

What Are Working Capital Loans?

All business owners need cash to cover short-term operational expenses. But there may be periods when they don't have enough money on hand and don't know where to turn for help. A business may also experience economic downturns with a resulting plummet in revenue. A loan for working capital can help any business continue to work and make financial progress. You can them to cover all these expenses and strengthen your cash flow.

Pros And Cons

A term loan for working capital is not for everyone. This section will help you get a clearer picture of how these business loans work. Pros:
  • Working capital loans for small businesses are synonymous with instant access to cash.
  • An unsecured loan for working capital means the lender doesn't require collateral.
  • Lenders usually have minimal restrictions on how you use working capital proceeds.
  • When managed correctly, proceeds help a business owner overcome a financial slump.
  • Interest rates usually are high, which increases the monthly payment amount.
  • Borrowers defaulting on the loan can ruin their personal and business credit scores.
  • Some lenders require a minimum credit score or a personal guarantee.
  • Getting a loan is an additional monthly expense your business may not be ready to assume.

Uses Of Working Capital Loans

Entrepreneurs use working capital funds to improve cash flow when actively building revenue streams. As you wait to close your working capital loan, you can plan the best way to use the money. With adequate finances in their bank account, they can reach their goals quicker and sustain their business through lean times. For example, a restaurant owner enlarges and makes the dining area more inviting to bring in more customers, or a manufacturer buys the latest equipment to stay competitive in their industry. Many business owners invest in research to add a new product line or service or hire a marketing professional to improve existing products and services sales. You could even designate part of the proceeds to an emergency fund to cover unexpected expenses. What's important when using working capital loan income is to make strategic purchases to enhance long-term growth. That could mean purchasing real estate, supplies, and materials or launching a new business to get the best return on your investment.

Types Of Working Capital Loans

Here are several sources of capital that safeguard your cash flow so there's money left over for growth.

Small Business Loans

Business loans are very versatile forms of financing.  You can find a loan that fits your business very easily, as many lenders work daily with small businesses.
Small business loans for working capital are the best way to improve your cash flow.
At Camino Financial, we match applicants with a small business loan with their needs. Our minimum requirements, flexible criteria, and fast funding make us an attractive alternative. Apply for a business loan today

Lines Of Credit

With a business line of credit, you have an available credit limit that you can access anytime, and you can advance cash as needed. Once approved, you can make withdrawals as needed. The bank continues to make cash advances as long as you make regular payments to repay the loan.


Equity financing is a method of raising funds for business expansion by selling a percentage of the business to investors. In return for the investment, the investors receive ownership interests in the company. This can take various forms, such as shares of common stock or preferred stock. The business does not require to repay the capital but gives the investors a claim on future profits in the form of dividends or capital appreciation.

Business Credit Cards

Your available credit limit will depend on your credit scores and current financial statements. Many business credit cards offer business rewards like airline bonuses, no annual fees, and cashback on select business purchases. However, business credit cards come with a drawback: be aware that rolling over more than 30% of your monthly credit limit will hurt your credit.

Trade Creditors

This means delaying payments for goods and services by working with trade creditors.  The flexible arrangement allows you to work out credit terms tailored to your business needs. Even though you can always pay off debt sooner, having additional time for payables is advantageous. For instance, your business may have a slower month, or unforeseen operating expenses could crop up.

Invoice Factoring And Invoice Financing

Invoice factoring happens when a third-party factoring company purchases your accounts receivable. They do so at a discounted fee (usually 70% to 98% of the face value of the invoices). So rather than wait 30 to 60 days to get paid by customers, you receive a cash payment instantly. Invoice financing is very similar, but the key difference is that you don't sell your invoices. Instead, they work as collateral. To qualify for this type of loan for working capital, your customers must have good credit. Once customers pay in full, you receive the remaining payment percentage less factoring fees.

Merchant Cash Advances (MCAs)

Merchant cash advances are fast cash options where the lender pays a lump sum to the borrower that they have to repay (with daily or weekly payments) with a percentage of future credit card sales. Merchant cash advance providers charge higher payback fees which eat away at a business's profit margin.

Money From Friends And Family

Small business owners turn to friends and family members as one of the primary ways to raise capital. These loans should be in writing and treated like any other debt obligation.

P2P Loans

You can get peer-to-peer online loans through investors instead of traditional banks or credit unions. Because there are fewer overhead costs, borrowers may pay lower rates.

How To Improve Your Working Capital: 10 Tips

If you've kept an eye on your working capital ratio and it's below the recommended for your operational costs, you can still work things out to keep your business' finances healthy. Here are several ways to improve your working capital without business financing:
  1. Try to reduce the time it takes for you to receive payments
  2. Don't offer a client payment facilities if he's known for not paying on time
  3. Create penalties for late payments
  4. Keep an eye on past-due accounts
  5. Make sure there aren't any unnecessary expenses in your business
  6. Work with suppliers that offer discounts and offers and negotiate payment terms
  7. Explore marketing to get more clients and increase your sales
  8. Don't stockpile your inventory
  9. Make sure you use tax incentives when filing your taxes
  10. Find an external source of capital

Should I Get A Working Capital Loan?

If your company is frequently short on cash, a working capital loan could be exactly what you need. Working capital loans are a good fit for small businesses that:
  • need to strengthen their cash flow
  • have a good balance between assets and liabilities
  • don't have money management problems
  • need cash to balance growth spurts and sales fluctuations
  • need financial help with short-term business expenses
They are not good fits with small businesses that:
  • are looking to make long-term investments
  • want to pay for significant business opportunities
  • want to purchase real estate
Working capital business loans can help you eliminate financial stress. But you should also ensure you have enough money to repay the loan.

A Loan For Working Capital Can Change Your Business's Future

Business capital helps small businesses get through slow periods when little or no revenue comes in. This short-term financial solution provides a cash flow boost. Then you can use it to improve your business's financial health. You don't need to stress out when a loan for working capital provides access to needed cash immediately. When managed correctly, financing working capital creates long-term financial gains. Are you ready to get a loan so you can strengthen your working capital? Apply for a business loan today  


Are working capital loans a good idea?

It depends on your business and how you plan to use the working capital loan. Typically, you can use a working capital loan to finance short-term needs such as inventory, accounts receivable, or short-term debt.

How do you qualify for a working capital loan?

You will need to demonstrate that your business has adequate revenue to repay the loan. This means providing financial statements and other documentation to show that your business is bringing in enough money to cover the loan payments. As with any loan, an applicant must meet the lender's requirements to get a loan. These may include credit score, how long in business, monthly revenue, and available collateral

How do small businesses get working capital?

There are a number of ways small businesses can get working capital, but the most common methods are through business loans and lines of credit. Both of these options provide companies with the funds they need to keep operations going, pay for inventory, and make other necessary purchases.

Why is working capital important for a new business?

Working capital is crucial for all businesses, but especially for startups. Businesses need money to pay for day-to-day expenses and cover unexpected costs. That's what working capital is for. A new business that cannot finance all these needs will have a hard time having success and might end up closing.

How do you get working capital for small businesses?

The first thing you'll need to do is find a lender. Once you do, complete the application form and submit any documents or information the lender might require. If the lender approves your application, you'll receive your loan in a few days.

What can you use working capital loans for?

Small business working capital loans help cover the day-to-day business expenses, for example, payroll, rent, previous debts, and purchasing inventory.

Can you get a loan for working capital?

Yes, it's possible to get a loan to strengthen your working capital. Some examples are online loans, bank loans, and lines of credit.

What is working capital?

Working capital is a financial metric that represents the operating liquidity available to a business. It is the difference between a company's current assets and its current liabilities. It's used to finance everyday business expenses.

What is the formula to calculate working capital?

In simple terms, you itemize your assets and subtract from that total your current debts. Working Capital = Current assets / Current debts

Is it possible to get a startup working capital loan?

Getting a working capital loan for a new business is possible, but it can be difficult. Most lenders want to see a track record of profitability and/or strong customer metrics before they will approve a loan for a new business. There are a few lenders who are willing to work with startups, and there are also some government programs available that can help businesses secure financing. It's important to research and compare different lenders to find the best option for your business.

Can you get a loan for working capital?

Yes, you can use a line of credit, invoice financing, the SBA's 7(a) Loan Program, or small business loans.

What are the benefits of working capital loans?

You can use the funds for anything you need, you don't have to put up collateral, and they're generally quick and easy to obtain.

What is the difference between a term loan and a working capital loan?

A term loan has a fixed repayment schedule and a fixed interest rate. On the other hand, a working capital loan is a short-term loan used to finance the day-to-day operations of a business.

How to get capital for a business?

There are many ways to raise capital for a business. Still, the most common methods are:
  • equity financing (issuing stock or selling ownership interests in the company),
  • debt financing (issuing loans),
  • and crowdfunding.

What is working capital used for?

You can use working capital for the day-to-day operations of a company. It allows a company to pay its employees, buy inventory, and cover other expenses. In short, working capital is the lifeblood of any business.

Where to find working capital?

You can look to traditional lenders like banks, or you could try more innovative financing options like peer-to-peer lending or crowdfunding.

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