Businesses experiencing cash flow problems, can opt for working capital loan to
cover the cost of your short term expenses, such as employee salaries, utility bills or rent.

This is why a working capital loan is usually short term, meaning you can usually borrow the money over 12 months or less.

Compare other types of business loans here

How to compare working capital finance

When comparing a working capital loan, make sure that you can borrow the amount you need from each lender, and whether they offer a repayment term you that your business can afford.

You need to apply to get a tailored Annual Percentage Rate (APR) from a lender, which will also tell you how much your repayments will be.

Before you apply for a capital loan, you can check the representative APR offered by each lender to give you an idea of the rates on offer.

The lower the APR on a working capital loan, the cheaper it costs in interest. However, if you miss any payments you could end up paying hundreds in interest penalties.

Use this comparison to find lenders that offer this type of loan, and only apply for the best loan when you have found the best deal.

Here is more information about business loans

What can you use a working capital loan for?

There are several types of business expenses you can use a working capital loan for, including:

  • Wages: to help if you have a shortfall with your business expenditure and need to pay your employees

  • Stock and equipment: to help pay for stock or business equipment before seasonal demands increase

  • Rent: to help cover the rent of your business premises if your business outgoings exceed your income

As working capital loans are designed to be short term, they may not be the cheapest choice if you need to borrow a large amount as your repayments will be higher.

If you do not think a working capital loan suits what you need, consider a different type of business loan instead.

Should you get a working capital loan?

If you need a cash injection for your short term expenses, a working capital loan could be suitable for your needs.

However, the APR is often higher than other loans, making repayments more expensive.

Some lenders specify what you can borrow money for with a working capital loan. This can range from wages, to inventory and marketing, so check before you apply.

If you are not sure whether you should apply for a working capital loan, you could also consider these alternative ways to borrow for your business.

What are the advantages of working capital finance

Working capital loans prove many businesses a life line when they experience cash flow issues. For example, businesses that are affected by seasonality, can use a working capital loan to tide them over during lean months.

Other advantages include:

  • Quick access to credit. Most working capital loan applications get approved within 24 hours.

  • Not secured. Capital loans are not secured to any of your business assets, so you don't risk losing them if you're unable to repay your loan.

  • Short terms. Working capital loans are short term, last only up to a year at most. This means that you'll pay off the loan fairly quickly and won't be spending money on interest payments for years to come.

Working capital loans FAQs

Q

Can I apply for a working capital loan in my own name?

A

To be eligible to apply, you usually need to be the owner of the company or a registered company director.

Q

Will my credit profile be affected if I miss a payment?

A

Only if your lender specifies that it will. Check with the lender before you apply, or consider an alternative way of borrowing for your business instead.

Q

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

A

Some lenders require you to have a business account with them to qualify for a business loan, but some may be more flexible so ask before you apply.

Q

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

A

No, most lenders need you to show proof of trading for at least 1 year before you are eligible to apply. You can compare business start-up loans here.

Q

Does my business have a credit record?

A

Yes, find it using a company like Experian. A poor credit record can cause your loan application to get rejected, so check before you apply.

About our working capital loans comparison

Q

Who do we include in this comparison?

A

We include working capital loans available directly from lenders and through brokers on our panel. Here is more information about how our website works.

Q

How do we make money from our comparison?

A

We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.

You do not pay any extra and the deal you get is not affected.

Last updated: 18 February, 2021