Camino Financial
By: camino-financial
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What Is A Loan For Working Capital?

A loan for working capital can help you if you experience financial instability. After all, a business owner needs sufficient cash to operate their business at a profit.

With this post, you’ll be able to decide whether to get working capital loans and put your business on a more solid financial foundation. Additionally, we take a deeper dive into this important topic to help you move your business forward with confidence. 

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What Is A Loan For Working Capital?

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.

You can use a loan to cover all these expenses and strengthen your cash flow.

A loan for working capital can help any business continue to work and make financial progress. 

Not knowing the importance of working capital can hurt a business.

Working Capital Loans For Small Business: Average Interest And Fees

Lenders offer working capital loans with APRs ranging from 6.99% to 80%

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. 

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.

Pros And Cons Of Loans For Working Capital

A term loan for working capital is not for everyone. This section will help you get a clearer picture of how this small business loan works.


  • 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.
  • If borrowers default on the loan, they 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.

hands counting a loan for working capital

Types Of Working Capital Loans

Analyze these business financing options. Then, choose the best financial match for your business.

Short-Term Loan For Working Capital

Short-term are precisely what they sound like: business loans that you repay over a short period. Online lenders are the perfect source of short-term working capital loans.

Borrowers aren’t required to limit loan proceeds only for working capital. They can choose to make asset purchases or expand their business.

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.

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Small Business Administration Loans

These are loans guaranteed by the Small Business Administration. Hence they are usually more affordable than other types of loans.

You can get an SBA loan through traditional banks and credit unions. Plus, you can get small and large loan amounts.

However, the loan process is typically slow, and borrowers with low credit may not qualify. In addition, some SBA loans require a downpayment and collateral.

Line Of Credit

With the best lines of credit, you have an available credit limit that you can access anytime.

You need to have a business checking or savings account to apply for a line of credit. Before the bank approves the line of credit, they need to review your business’s balance sheet to verify your assets and liabilities.

They may request other documents to determine your creditworthiness.

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.

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 are fast cash options where the lender pays a lump sum to the borrower. Then, you repay it 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.

Trade Credit

A seller extends credit to a buyer by providing a good or service which the buyer pays for later. 

These trade credits may last from 7 to 120 days or longer. The lender restricts credit terms based on a business’s creditworthiness.

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.  

Home Equity Line Of Credit

A HELOC allows homeowners to use their home’s equity to qualify for a line of credit. Borrowers can make withdrawals up to their approved credit limit.

Business credit cards can also be a way to strengthen the working capital of your small business. The difference with the other products listed here is that you don’t receive a lump sum.

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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

A working capital term loan can help you eliminate financial stress. But you should also make sure you have enough money to repay the loan. 

A good way of deciding if a loan is right for you is by using a business loan calculator

This tool can help you understand how much you’ll have to pay each month. That way, you can choose the amount that best works for you.

Term Loan Calculator

How To Apply For A Working Capital Loan

1. Know what loan amount you can afford

Having money to spend helps you run your small business efficiently. If you don’t know how much to borrow, choose an amount with comfortable repayment terms

Start by getting a working capital loan for a smaller amount and making timely payments. Then you’ll be able to qualify for a future more considerable loan amount with better terms.

2. Choose a working capital loan company

List banks, financial institutions, and online lenders. Then, compare their requirements, such as:

  • APR
  • minimum credit score
  • monthly revenue
  • number of years in business

Pay attention to TrustPilot scores and other types of ratings. These indicate how pleased customers are with each lender’s service. 

The working capital loan company you choose should have a customer service team you can contact if you have questions before, during, and after the loan process.

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.

Apply With Camino Financial!

3. Prepare your documents

Lenders typically ask to see these documents: 

  • 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)

We recommend you have these documents and information ready before applying for the loan for working capital.

4. Fill out an application

Both brick and mortar financials and online lenders allow applicants to apply for a working capital loan online. You can also complete a paper application for the working capital loan. 

Provide the requested information and submit your form.

A Camino Financial application won’t take you more than 10 minutes.

5. Get pre-qualified

Lenders may notify you instantly that you pre-qualified for a loan, but some do not. If you haven’t heard anything in a couple of days, contact their customer service staff.

6. 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.

7. Get funded

Once you’re 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.

With Camino Financial, you can receive your cash in as fast as 2 days!

Get A Loan For Working Capital

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How Can A Company Increase Its Working Capital?

Use these quick tips to give your cash flow an instant boost.

Trim the fat

This means to look closely at how you spend money and how to save money.

For example, can you reduce vehicle, office, advertising, and staff expenses? Perhaps you could shop insurance costs or negotiate better pricing with suppliers.

Lean management is a strategy all about producing more with less.

Create better operational habits

Slow paying customers affect your cash flow; checking their credit is a good practice. Likewise, don’t use working capital to purchase assets. Make a budget so you can track expenses.

Know your working capital ratio (current assets/current liability)

A quotient rating between 1.5 to 2.0 means you are using the resources you have efficiently. By staying on top of this ratio, you know how effectively you operate your business.

Make debt payment a priority

How well you’ve paid past debts helps lenders approve a loan for working capital.

By paying down debt on time, you establish a good credit history.

Streamline your products and services

If a product or service isn’t performing well, consider deleting and replacing them with ones that produce more revenue.

happy female business owner

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

Working capital helps small businesses get through slow periods when little or no revenue is coming 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, small business working capital loans create long-term financial gains.

We encourage you to request a quote for a business loan. You will be pleasantly surprised that Camino Financial is different from other lenders.

That’s true because our motto, “No Business Left Behind,” is uppermost in our minds as we work with clients.  

Getting one of our small business loans is a smart option for you and your business.

Apply now!



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 to get working capital for small businesses?

The first thing you’ll need to do is find a lender. Once you do, proceed to 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 working capital loans be used for?

Small business working capital loans help cover the day-to-day business expenses, for example:

  • Payroll
  • Rent
  • Previous debts
  • 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.

Can you get a working capital loan with bad credit?

Yes, lenders offer loans to applicants with bad credit. 

However, they charge higher interest rates and may offer a smaller loan. Why? Because they assume more risk. 

Some bad-credit lenders may ask for collateral to secure the loan. Others have a minimum monthly or annual revenue requirement.

How do you qualify for a working capital loan?

As with any loan, an applicant must meet the lender requirements to get a loan. These may include: 

  • credit score
  • how long in business
  • monthly revenue
  • available collateral

What is a good interest rate on a working capital loan?

Depending on the type of working capital loan you apply for, you could pay 6% to 99%.

Applicants with the best credit histories and revenue receive lower rates and better repayment terms. 


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