Business Loans
Working Capital Loans

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Information written by Rhiannon Philps , Connor Campbell Last updated on 04 July 2022.

Working capital is the cash your business has available to spend, after taking into account any money it owes and any money it expects to receive over the next 12 months.

Ideally, your business will have enough working capital to cover its day-to-day running costs and pay for any unexpected expenses that may appear. However, this isn’t always the case. Whether it’s due to seasonal fluctuations in revenue or a temporary cash flow issue, some businesses may find themselves in need of a short-term cash injection to boost their working capital.

This is where working capital loans can help. They offer flexible, short-term funding to help businesses with their cash flow and can be used for a range of purposes. Businesses in a variety of industries can benefit from these loans, with a number of lenders and loan types to choose from.

Find out more about working capital loans, how they work and what they can be used for below. Or, you can go straight to the comparison table and check out which working capital loans you could qualify for.

What is a working capital loan?

A working capital loan is simply a business loan that is designed to help a business cover a temporary shortfall in their cash flow, or working capital.

Working capital is broadly defined as the amount of cash a business has available to spend on the daily running of their operations, and is calculated by subtracting current liabilities, such as rent, bills, wages and payments owed, from current assets over the next 12 months.

Sometimes businesses may not have sufficient working capital to pay for their regular expenses. A working capital loan aims to offer a solution to this problem by providing businesses with short-term finance that will boost their working capital and allow them to pay for what they need.

Businesses can use a working capital loan for a variety of purposes, such as:

everyday expenses, e.g. rent, bills or the payroll
paying suppliers
buying equipment
covering emergency expenses
paying for stock

Essentially, the loan aims to help businesses manage their finances by improving their cash flow.

Bear in mind that working capital loans are not intended for long-term investments in your business, but to cover short-term needs.

How to use a working capital loan

Once you have a working capital loan, you will normally be able to use it as you wish. Lenders won’t usually impose restrictions on what you can spend it on, so you could use it to pay bills or buy stock, for example.

To repay it, you will make the monthly payments as agreed with the lender. Terms of working capital loans tend to be relatively short, ranging from a few months to a few years.

While many working capital loans are unsecured, some may be secured on property or you may need to give a personal guarantee to the lender that you will repay the loan if your business can’t.

What are the advantages of a working capital loan?

The benefits of a working capital loan include:

You can apply for and receive funds relatively quickly. Some providers will even send you funds within 24 hours of approval.
Most lenders won’t set restrictions on what a working capital loan can be used for, so you have some flexibility in how you spend it.
They are short-term so you pay them off fairly quickly. Most working capital loans are unsecured, so the property of your business is not at immediate risk. However, you should still check with the provider as some loans will be secured and/or require a personal guarantee.

What are the disadvantages of a working capital loan?

While working capital loans can offer much-needed help to businesses, there are certain points you need to bear in mind.

A working capital loan is designed to offer short-term funding. The terms for working capital loans can be as short as a few months, so you need to be confident that your business would be able to repay the loan in full relatively quickly.Working capital loans can have higher interest rates, so compare providers and see what deals your business potentially qualifies for.

When are working capital loans a good idea?

Working capital loans might be worth considering if your business experiences major fluctuations in revenue. For example, if your business is seasonal with some months busier than others, your level of working capital might be lower than you would like in quieter periods. This can make it hard to meet all your operating costs and expenses, so a loan could tide you over until sales pick up again.

They can help businesses to stabilise and manage their finances in the short term, and help them to pay for expenses, such as rent, bills, stock and wages.

It is not just seasonal businesses that experience fluctuations in their cash flow and could find a working capital loan useful. For example, if your business has a lot of money tied up in stock, you may need a short-term loan to cover costs until you sell it all. Ultimately, any business with a low level of working capital that needs a cash injection to cover its immediate expenses may choose to consider working capital finance.

Bear in mind that you should only take out a loan if your cash flow problems are temporary and you expect them to recover. These loans will not help your business if the drop in cash flow is more permanent.

Working capital loans are not the best option if you are looking for funding for long-term investment.

How to get a working capital loan

Make sure you check the eligibility criteria for working capital loans, as lenders may require you to have a minimum number of years trading and a separate business bank account.

If your business qualifies, you can then apply for a working capital loan online by submitting relevant information about you and your business.

Lenders are likely to want to know details about your trading history, your average turnover, the size of loan you want to apply for and what you want to use the loan for.

They will use this information, as well as your business’s credit score, to make a decision on your application.

If successful, you will normally receive the loan relatively quickly, sometimes within 24 hours.

What are the alternative ways working capital is financed?

Working capital loans are not the only way you can cover any short-term cash flow issues. The type of working capital finance that is most suitable for your business depends on the type of business you run and your individual circumstances, so it’s worth considering other options to see if they are more suitable.

All of the options below could allow you to access cash relatively quickly but they work in different ways.

Line of credit. This is a flexible type of finance that you can draw on as and when you need to. The lender gives you access to a set sum, but you can choose when and how much you borrow and only pay interest on what you use. Find out more about business credit lines.

Invoice financing. This is a specialist type of business finance that allows you to release cash from unpaid invoices if you need the money immediately, rather than waiting for the customer to pay the invoice. Borrowing through invoice finance will come at a cost.

Overdraft. Your business bank account may come with an overdraft that you could use if your business is temporarily short of cash. This can be a fast way to access funds, but check what fees and charges could apply.

Merchant cash advance. With this type of finance, your business can borrow a sum of money from a lender, which will be based on the income you make each month. Repayments will be taken from a percentage of each debit and credit payment you receive. Lenders work with card providers to facilitate this. Find out more about merchant cash advances.

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HHow does NerdWallet’s working capital loans comparison work?

If you think your business could benefit from a working capital loan, you can use our comparison table to see some of the options that are available to you. You will be able to see information, such as the size of loans offered, the loan durations offered, and some of the eligibility criteria set by the lender, including trading history and minimum annual turnover.

Working Capital Loan FAQs

What is a good working capital?

The level of working capital that is “good” will vary between businesses and industries. A working capital ratio of around 2.0 is considered good, while anything below 1.0 is seen as cause for concern.

How is your working capital ratio calculated?

You can work out your working capital ratio by dividing the assets your business currently has by its current liabilities. Business assets might include money in your business account, your inventory, and other assets that can be converted to cash relatively quickly. Examples of liabilities could include rent, bills, debts, and taxes. Dividing your assets by your liabilities will give a number that shows your working capital ratio. A higher number is generally better for your business and shows it is in good financial health.

Do you want high or low working capital?

If the working capital of your business is too low, it means your business could struggle to pay day-to-day expenses. Having a high level of working capital shows your business is in a healthy position with enough cash in reserve to invest and expand.

Does a working capital loan affect my personal finances?

A working capital loan is linked to your business, so shouldn’t affect your personal finances. The exception is if you provided the lender with a personal guarantee that you would repay the loan if your business couldn’t. Read more on how business loans could affect your personal finances.

How long will it take to get a business loan for working capital?

This will depend on the lender, but you can normally receive a working capital loan soon after your application is approved. Working capital finance is designed to be a quick solution for businesses which need a cash flow boost and some providers will make a decision within 24 hours.

Do I need a business account to apply for a business loan?

This can depend on the lender, but many providers will only offer loans to businesses that have a separate business bank account.

Can I get working capital finance with bad credit?

You may be able to get a working capital loan with bad credit from some lenders, but other lenders may be more reluctant to approve your application or set higher interest rates. You may improve your chances of getting accepted if your loan is secured against an asset or you provide a personal guarantee.

Can I pay off my business loan early?

Yes, most providers will allow you to pay off your loan early. Check if you would have to pay any early repayment charges if you choose this option.

Can I get a working capital loan to start a business?

Not normally. Working capital loans are designed to help existing businesses with their cash flow, rather than giving startups an injection of cash to get their business off the ground. Many lenders will require businesses to have a certain number of years’ trading history to qualify for a working capital loan.

If you need finance to fund your new business, a startup business loan is likely to be more suitable.

About the author:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

Compare Working Capital Loans

6 products found

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Broker
Love Finance Working Capital Loans

Apply for working capital and borrow up to £250,000

Find out which working capital offers you are eligible for without affecting your credit rating

Same-day funding available
Minimum Turnover
£50,000 p.a.

Available Amounts
£5,000 to £250,000

Available Terms
3 months to 5 years

See Deal + More info
Company details
- Love Finance is a lender and broker
- Get a decision in minutes via a simple online form
- Get funding within 24 hours
Eligibility Criteria
- Must have been trading for at least 12 months
- Must have clean credit or no CCJs
Broker
Swoop Funding Working Capital Loans

Plug gaps in your short-term budget

Provides financial security for unexpected costs

Can help you to keep your business finances running smoothly
Minimum Turnover
£50,000 p.a.

Available Amounts
£2,000 to £1,000,000

Available Terms
3 months to 3 years

See Deal + More info
Company details
- Simple, secure and speedy search of 1,000 funding providers without affecting your credit rating
- Free access every type of finance including the Recovery Loan Scheme
- Online management allows you to find funding opportunities and track applications
Eligibility Criteria
- Must be based in the UK
- Must have an annual turnover of £50,000+
- Must have been trading for 12 months or more
Broker
Funding Xchange Working Capital Loans

Discover instant & personalised Working Capital offers in just 3 minutes

Finance your company’s everyday operational needs

Compare working capital lenders and find the rate right for you
Minimum Turnover
£100,000 p.a.

Available Amounts
£1,000 to £500,000

Available Terms
1 month to 5 years

See Deal + More info
Company details
- Access 70 lenders from one simple funding request
- Easily compare the choices available, including RLS options
- Apply with confidence, no impact on your credit score
Eligibility Criteria
- Your business must have been trading for a minimum of 2 years
- Your business must have an annual turnover of at least £100,000
Cubefunder Working Capital Loans

Only available to Limited Companies in England and Wales with 3+ months' trading

Borrow £5,000 - £100,000 for any business purpose

No penalty fees whatsoever, only pay for the time you use the loan

Flexible, tailored repayment schedule to fit in with your cash flow
Minimum Turnover
£50,000 p.a.

Available Amounts
£5,000 to £100,000

Available Terms
3 months to 1 year

See Deal + More info
Company details
- Fast and Flexible funding from £5,000 - £100,000 for Limited Companies within England and Wales
- No penalties for Late payments or Early repayment
- Apply and receive funds within 48 hours
Eligibility Criteria
- Must have a minimum Turnover of £4,000 per month
- Must have been trading for at least 3 months
- Must be a Limited Company trading within England and Wales
- Must have a UK Business Bank Account
- Director must control shares
- Up to 3 Directors (tolerance)
iwoca Working Capital Loans

YOUR BUSINESS MUST BE A LIMITED COMPANY WITH A MINIMUM OF 6 MONTHS TRADING HISTORY

Flexible credit facilites suitable for boosting working capital

Early repayment with no fees

Dedicated account manager and decisions within 24 hours
Minimum Turnover
£50,000 p.a.

Available Amounts
£1,000 to £500,000

Available Terms
Up to 24 months

See Deal + More info
Company details
- Flexible finance for small businesses from £1,000 to £500,000
- No long term commitments and flexible repayments to fit for your business
- Apply online in minutes for a decision (some decisions may take up to 24 hours)
Eligibility Criteria
- Limited companies only
- Sole-traders, partnerships and start-ups not currently accepted
Previse Working Capital Loans

Previse Instant Advance is a fast cash flow facility designed to help businesses grow

Terms from 3, 6 and 9 months

Completely unsecured, no personal guarantees or security required
Minimum Turnover
£250,000 p.a.

Available Amounts
£25,000 to £2,00,000

Available Terms
3, 6 or 9 months

See Deal + More info
Company details
- Previse Instant Advance is a fast cash flow facility, designed specifically to help businesses grow
- Completely unsecured, no personal guarantees or security required
- Available with a variety of short term lengths
Eligibility Criteria
- Must be a limited company
- Must have a minimum of 6 months active trading history Must have a minimum annual turnover of £250,000

Suppliers that don't offer All Business Working Capital Loans but may offer suitable alternatives:

Nationwide Finance Business Finance

Nationwide Finance help 35,000 businesses get finance each year

Direct funder - not a broker

Same day decision, funds within 24 hours
Minimum Turnover
No minimum

Available Amounts
£8,000 to £500,000

Available Terms
1 to 5 years

See Deal
Company details
- Nationwide Finance help 35,000 businesses get finance each year
- Direct funder - not a broker
- Same day decision, funds within 24 hours
Eligibility Criteria
- Nationwide Finance help 35,000 businesses get finance each year
- Direct funder - not a broker
- Same day decision, funds within 24 hours
Funding Circle

Your business must have a minimum of 12 months’ trading history

Short & long term business loans from £10,000 to £500,000 at fixed rates

Spread costs over 3 months with FlexiPay line of credit from £2,000 to £250,000 - only pay when you use it - simple flat fee

Rated 'Excellent' on TrustPilot - apply online in minutes, quick decisions, UK-based support team
Minimum Turnover
£25,000 p.a.

Available Amounts
£10,000 to £500,000

Available Terms
6 months to 6 years

See Deal
Company details
- Short & long term business loans from £10,000 to £500,000 at fixed rates
- Spread costs over 3 months with FlexiPay line of credit from £2,000 to £250,000 - only pay when you use it - simple flat fee
- Rated 'Excellent' on TrustPilot - apply online in minutes, quick decisions, UK-based support team
Eligibility Criteria
- Short & long term business loans from £10,000 to £500,000 at fixed rates
- Spread costs over 3 months with FlexiPay line of credit from £2,000 to £250,000 - only pay when you use it - simple flat fee
- Rated 'Excellent' on TrustPilot - apply online in minutes, quick decisions, UK-based support team
Broker
Tide

Tide works with a number of partners who offer a range of flexible business funding solutions

They will run pre-eligibility checks, without affecting your credit score, to show you credit options tailored to your business

Connect your business bank account in minutes to see your credit options
Minimum Turnover
Varies

Available Amounts
£500 to £15,000,000

Available Terms
1 month to 6 years

See Deal
Company details
- Tide works with a number of partners who offer a range of flexible business funding solutions
- They will run pre-eligibility checks, without affecting your credit score, to show you credit options tailored to your business
- Connect your business bank account in minutes to see your credit options
Eligibility Criteria
Fleximize

YOUR BUSINESS MUST BE A LIMITED COMPANY WITH 6+ MONTHS' TRADING

Fast, hassle-free business loans of up to £500,000 for almost any purpose

Industry-leading flexibility – top-ups, repayment holidays, and penalty-free overpayments available on all loans

Award-winning customer service – rated 4.9/5 on Trustpilot
Minimum Turnover
£120,000 p.a.

Available Amounts
£10,000 to £500,000

Available Terms
3 months to 5 years

See Deal
Company details
- Fast, hassle-free business loans of up to £500,000 for almost any purpose
- Industry-leading flexibility – top-ups, repayment holidays, and penalty-free overpayments available on all loans
- Award-winning customer service – rated 4.9/5 on Trustpilot
Eligibility Criteria
Capify

Your business must have a minimum of 1 years trading history.

Superfast lending. Receive your funds the following day

All credit profiles are considered. Loans for any business purpose

Easy application process. Get conditionally approved in just 2 minutes
Minimum Turnover
£120,000 p.a.

Available Amounts
£5,000 to £500,000

Available Terms
3 to 18 months

See Deal
Company details
- Capify loans are paid back in very small automated regular payment; either daily or weekly
- A fast and easy business funding alternative for SMEs
- Funds can be used for any business purpose, from managing cashflow through to improving technology
Eligibility Criteria
YouLend

Your business must take on a minimum of £3,000 per month of card sales

YouLend is Europe's largest revenue finance provider - working with eBay, Shopify and Just Eat

YouLend funds over 5,000 UK SMEs every month including sole traders, partnerships and limited companies

Apply online in minutes, for a decision within 24 hours
Minimum Turnover
£3,000 card sales per month

Available Amounts
£3,000 to £1,000,000

Available Terms
3 to 18 months

See Deal
Company details
- YouLend is Europe's largest revenue finance provider - working with eBay, Shopify and Just Eat
- YouLend funds over 5,000 UK SMEs every month including sole traders, partnerships and limited companies
- Apply online in minutes, for a decision within 24 hours
Eligibility Criteria
- YouLend is Europe's largest revenue finance provider - working with eBay, Shopify and Just Eat
- YouLend funds over 5,000 UK SMEs every month including sole traders, partnerships and limited companies
- Apply online in minutes, for a decision within 24 hours
365 Business Finance

Your business must process credit and debit card transactions to apply for this product

A flexible business funding alternative

Cash advanced against card transactions

Pay back an affordable % of your card transactions
Minimum Turnover
£10,000+ card transactions per month

Available Amounts
£10,000 to £300,000

Available Terms
4 to 18 months

See Deal
Company details
- Get between £10,000 and £300,000
- Pay back through your customer card transactions
- A single all inclusive charge that never changes
- No interest, APRs or hidden extras
Eligibility Criteria
- Your business must have been trading for at least 6 months
- Your business must accept debit and credit card payments
- Your business must take at least £10,000 per month in card transactions.
Barclays

Flexible borrowing for your business - unsecured (up to £100,000) and secured loans available

Fixed interest rates available on all loans, plus variable interest rates for loans over £25,000

Subject to application, financial circumstances and borrowing history. Eligibility criteria applies.
Minimum Turnover
No minimum

Available Amounts
From £1,000

Available Terms
1 to 20 years

See Deal
Company details
- Flexible borrowing for your business - unsecured (up to £100,000) and secured loans available
- Fixed interest rates available on all loans, plus variable interest rates for loans over £25,000
- Subject to application, financial circumstances and borrowing history. Eligibility criteria applies.
Eligibility Criteria
- Flexible borrowing for your business - unsecured (up to £100,000) and secured loans available
- Fixed interest rates available on all loans, plus variable interest rates for loans over £25,000
- Subject to application, financial circumstances and borrowing history. Eligibility criteria applies.

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