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Working Capital Lenders

  • Quick payback options 
  • Amounts up to $500,000
  • 12+ months time in business
  • 500+ credit score
Customer Rating 1.6667 of 5 (3 reviews)
  • Range of financial products
  • Amounts of $10,000 to $1,000,000
  • 24+ months time in business
  • 600+ FICO score
Editor’s Rating 3.58 of 5 (1 reviews)

    Balboa Capital is a direct lender in the business space that's been around since 1988. It lends money to small to medium businesses for a range of commercial and business purposes, with a maximum loan amount of $1 million for specific products. 

Editor’s Rating 4.4 of 5 (1 reviews)
  • Low rate programs available 
  • Amounts of $5,000 to $1,000,000
  • 24+ months time in business
  • 600+ credit score
Editor’s Rating 4.11 of 5 (1 reviews)

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All You Need to Know About Working Capital Business Loans

Taking out a business loan is a common occurrence for businesses of all sizes. There are any number of reasons why a business loan could be a good idea, from needing to seize an opportunity to expand to lacking cash flow for seasonal stock. Business loans come in a variety of shapes and sizes, from short term business loans, working capital, and invoice factoring to long-term real estate loans, equipment financing, and working capital line of credit options.

Before you approach a lender you need to do your research. Consider why you need a business loan so that you can apply for the most appropriate business loan available. Think about whether you’d prefer to borrow through a bank or an online lender and educate yourself about how to apply for working capital business loans and what questions to ask about business loans. We’ve brought you an in-depth run-down that covers all you need to know about small business working capital loans.

Why you Need a Working Capital Business Loan

There are many reasons why you might need a small business operating capital loan. Many businesses can encounter cash flow problems and need to take out a working capital business loan to pay for new stock while waiting for invoices to be paid. You might need a short-term business loan to take advantage of an exciting possibility to expand your business or to be ready to make the most of an upcoming seasonal opportunity.

On the other hand, businesses also need long-term loans from time to time. These could cover real estate purchase or development, the need to buy or rent equipment, or a long-term business investment. There are many different types of business loan which we discuss in more detail below. Being clear about the reasons why you need a business loan will help you to choose the best type of loan and increase your chances of success when you apply.

How to Get a Working Capital Loan

Small businesses that need to apply for working capital products of any sort are in a good position today. Larger corporations and enterprises are limited in their sources of funding since they have to apply for enterprise-level loans which can only be supported by large banks and cumbersomely slow big lenders.

In contrast, a small business seeking a working capital loan has plenty of options for funding. Small businesses can get working capital funds from smaller banks, but also expand their net further to include loans from the government-backed Small Business Association (SBA), credit unions, and the up and coming, fertile field of online lending platforms.

Online lending platforms are a non-traditional option but one that small businesses would do well to consider. Online lenders are frequently more flexible in their eligibility requirements than established banks. The application process is usually faster and more straightforward, with funds coming through in a much shorter time window. By going through an online lender, small businesses can access a greater range of working capital business loans all in the same place, like invoice factoring, merchant lines of credit, and real estate loans. Online lenders view small businesses as valuable growth partners and are frequently eager to form working partnerships.

What you Need to Apply for a Working Capital Business Loan

It’s understood that all working capital lenders are different and have different application processes. That said, some things are common between most online business lenders. You’ll find that they all are looking for you to provide information on the following:

  • That your company has been in business for a minimum amount of time (this can be anything from 6 months to 2 years)
  • That you have a minimum level of monthly revenue so that you can repay the loan (anything from an average of $6,000 per month to over $10,000 monthly)
  • Sometimes the business owner’s personal credit score is taken into account, in which case you’ll need good to excellent credit
  • Collateral, depending on the loan type
  • What exactly you’ll be using the loan for, by sharing a detailed business plan

The vast majority of online working capital lenders have a fully online application process which is much faster and easier to understand than applying through a bank. Lendio and LendingTree are just two examples of online lenders with application forms that take just five minutes. Generally, you’ll be asked a few questions about your business history, monthly revenue, and if you’ve had any bankruptcies in the past. Many lenders will also run a soft credit pull to check your credit standing before pre-approving your request.

Online lenders will usually pre-approve you for a working capital loan based on the information you share about your business’ financial situation. They will then ask for most of the same documents that a bank would require, but by this time you’ve already been pre-approved so at least you know that your hard work collecting documents is likely to have a positive result.

Different lenders are also going to have different working capital loan requirements in terms of the documents that they ask you for, but once again the items required are pretty standard. If you’re preparing to take out any sort of small business operating capital loan, you should start gathering together these documents:

  • Business tax returns (usually for up to three to five years)
  • Business bank statements for the last six months (you might also be asked for your personal bank statement for the past six months)
  • Your business’ credit information (and possibly your personal credit information as well)
  • Your business’ monthly revenue for the last six months, one year, or up to five years
  • A detailed business plan that defines your plans for this loan
  • Your business license, relevant certificates, and landlord certificates (if relevant)
  • Current profit and loss statements
  • History and future projections for your cash flow
  • You might be also asked for in-depth resumes of the most important executive staff members
  • Legal agreements such as a franchise agreement, partnerships, etc.

You should prepare yourself for a long journey until the funding comes through, but still hope that it won’t take too long. Online working capital lenders process your application much faster than traditional banks. Some online lenders can have the funds through to you within a few hours or the next working day, while others can take up to a couple of weeks. The time to funding is also going to depend on which type of loan you’re after, as some have a longer process than others.

How do Small Business Capital Loans Work?

Small business capital loans work in more or less the same way as a personal loan, but they are more complicated to agree upon. Like with a personal loan, the business lender will want to know about your financial reliability, credit standing, and how confident you are in repaying the loan. As you already know, a successful business depends on so many elements which are difficult to predict or to fully quantify, making lenders more concerned about business loans than personal loans.

However, business loans are fairly straightforward in their setup. A traditional working capital business loan, whether it’s long term or short term, will include a fixed repayment term, set APR rates, and agreed-upon charges for events like missing a payment or needing to cash a check. You should discuss rates, fees, and payment dates with the lender before signing any agreement. It’s important to remember that you are the customer when it comes to agreeing on a loan. If you aren’t comfortable with the terms that the lender suggests, don’t be afraid to walk away from the loan agreement.

The Questions You Need to Ask About Working Capital Loans

It might be easy to turn to a business loan when your business needs working capital payments, but that doesn’t mean that it’s something to undertake lightly. There are a number of questions that you should consider both before and during the process to find the best working capital companies.

Before you even start looking for a working capital loan, ask yourself why you need this funding. What is the purpose of the loan? Is a working capital loan the best way to meet your needs or are there other options that are worth exploring? Remember that a business loan is still debt and your aim should always be to reduce your business and personal debt as far as possible.

If you’re certain that a working capital business loan is best for your business there are more questions to ask. Consider the different types of small business loans that we describe below. Think about which one is the most suitable to your financial situation at the moment and be realistic about how you will repay it. Ask yourself how long you’re likely to need to repay the loan, what is the minimum amount you need to realise your plans as well as the maximum amount that you could repay in the timeframe before you. This should help you to clarify what you can and can’t afford and how long a term you prefer.

Once you start comparing working capital terms from different banks and lenders you should refer back to these questions and add some new ones. No matter which lender you go to there are some questions you should always ask. These questions will help you narrow down your options to a financial institution which is the most appropriate for you and find the lender that best matches your business needs.

  • How much experience do you have in lending to my industrial sector?
  • What is the average size loan that you’ll make to a business the same size as mine?
  • How long is it likely to take until my funding comes through?
  • What documentation do you require when I apply for a loan?
  • Who oversees loan applications and approval?
  • How long of a repayment term do you offer for loans of the size that I’m seeking?
  • Are the interest rates fixed or variable? If they are variable, what governs how they change?
  • Do you charge any early prepayment charges?
  • Are there any other charges connected with taking out a loan through you (these could include origination fees, check processing fees, late payment fees, etc.)

What are the Types of Business Loans?

Not all small business working credit loans are the same. It’s important to understand the different types of business loans so that you can choose the best working capital loans for your business needs.

Short term working capital loans are traditional business loans with a term that’s generally no longer than a year and can be as short as a couple of weeks. They are ideal for businesses that need fast working capital loans and expect to be able to pay it back very soon. Seasonal businesses that need to buy stock or a business experiencing temporary cash-flow issues that needs a stop-gap to pay salaries or expenses would turn to a short-term loan. Average APR: 6-13%

Long term working capital loans are business loans with terms that last several years, sometimes even up to 20 years. They should be used with caution, since if your business needs a loan over such a long period of time it might not be financially viable in the long run. That said, for certain purposes like investing in real estate or expensive equipment, long-term business loans are very practical. The APR rate is usually higher because of the greater risk of defaulting on the loan, but monthly payments tend to be lower because the cost is spread out across a greater period of time. Average APR: 7-15%

Secured loans are best for companies that have assets to put up as collateral against the loan. The good news is that this usually brings down the interest rates; the bad news is that if you default on payment, you risk losing whatever you put up as collateral. Secured loans can be taken out against real estate, office or factory equipment, or other tangible assets. Average APR: 6-8%

Unsecured loans are the opposite of secured loans – there is no collateral. Your credit score and/or your business’ monthly revenue are going to be paramount when applying for an unsecured loan so it’s only for businesses with high revenues and excellent credit scores. Average APR: 4-36%

Working capital line of credit loans operate in a way that is similar to a credit card. With a line of credit you’ll apply for permission to withdraw funds up to a specific maximum credit limit. Once the agreement is made you can withdraw as much as you want, whenever you want, almost instantly. The flexibility makes them very useful for any business that needs a source of working capital. Average APR: 9-108%

Invoice factoring loans allow businesses to borrow against the invoices that are owed to them by other companies. They are usually a fast path to funding and bring a lot of flexibility to businesses that need working capital. Average APR: 11-64%

Construction or commercial real estate loans are long-term loans that are tailored for businesses to buy or build premises for the business. They can be secured against the collateral of the property like a traditional mortgage. Ideal for businesses that need new premises. Average APR: 2-7%

Merchant cash advances are a more risky form of short-term loan. They operate by letting you borrow a percentage of your expected future sales based on the volume of your monthly credit card sales to date. The risk is that you won’t make as many sales in the future as you did in the past and end up owing more than you take in. Best only for businesses with strong credit standing and which in low-risk industries. Average APR: 2-60%

Equipment loans are usually mid-to-long-term secured loans. They permit businesses to invest in expensive manufacturing or office equipment and secure the loan by putting that equipment up as collateral. Ideal for businesses that need equipment to grow their business. Average APR: 6-99%

Accounts receivable loans are similar to invoice factoring. They use outstanding invoices as collateral against a very short-term loan (usually just a matter of days or weeks). They are good for businesses that need quick working capital loans and have many unpaid invoices. Average APR: 3-8%

What if I Already Have a Working Capital Business Loan?

In business parlance, taking out a second (or third, or even fourth) business loan at the same time is called stacking. It’s a lot like running debts on multiple credit cards at the same time and just like juggling credit cards, stacking loans is a risky practice which can lead to financial disaster.

Taking out a business loan is nothing to be ashamed of and there are many good reasons for it which we’ve already discussed. But, common wisdom states that if you can’t manage to pay off one loan before taking out another one, you might be having a business crisis that is too large to manage with a loan. Juggling more than one working capital loan debt is an indication that your revenue isn’t high enough or that your cash flow is getting stuck.

That said, stacking loans isn’t always a bad thing. Like with all forms of debt, much depends on the type of loans you’re carrying. It’s entirely plausible for a business to take out a long-term real estate loan to cover new premises, add a secured equipment financing deal and then also apply for a short-term working capital loan to pay for seasonal stock. In these cases, stacking loans can work perfectly well to keep your company running smoothly.

A business working capital loan can be exactly what your business needs to succeed, expand, or remain competitive. As always, the key to finding the best working capital loans is to do your homework both before looking for a working capital lender and while you compare working capital business loans. This page is a great place to start for reviews of the best working capital companies.