A working capital loan is financing that pays for the everyday running of a business, such as payroll, rent, inventory and materials, when that money has to go out before customers pay you. For working capital loans for small business owners, the usual choices are revenue-based financing (often called a merchant cash advance), a business line of credit, a short-term loan, an SBA 7(a) working capital loan and invoice factoring. The right one depends on how soon you need the money, how long the gap lasts and what your business can show a funder. Revenue-based financing through our network runs from $5,000 to $2,000,000 and typically funds in one to two business days, lines of credit go up to $250,000, and SBA loans take weeks but carry the lowest payments.
What working capital is, in plain numbers
Working capital is what you own that will turn into cash within a year, minus what you owe within a year. Accountants call the two sides current assets and current liabilities, and both sit on your balance sheet.
A business with $40,000 in the bank, $35,000 in unpaid customer invoices and $25,000 of inventory has $100,000 in current assets. If it owes $30,000 to suppliers, $12,000 in payroll, $8,000 on a business card and $10,000 in loan payments over the coming year, its current liabilities are $60,000, and its working capital is $40,000.
That number can look healthy while the bank account runs dry, because $60,000 of those assets in this example are invoices and stock that have not turned into cash yet. Bank examiners measure this with the operating cycle, which the Office of the Comptroller of the Currency's handbook on asset-based lending describes as inventory days plus receivable days, the time it takes to buy goods, sell them and collect the money. The handbook notes that a company with a long operating cycle likely has a greater need for financing. Working capital financing covers the weeks between paying out and getting paid.
The need is common. In the Federal Reserve Banks' 2025 Report on Employer Firms, 56% of small employer firms said paying operating expenses was a financial challenge and 51% named uneven cash flow, which in that survey includes collecting on receivables. Among firms that applied for financing, meeting operating expenses was the most common reason, cited by 56% of applicants.
The cash-flow gaps that make owners look for business working capital
Most working capital needs come from a handful of situations.
- Payroll comes due every week or two, while customers on net 30 or net 60 terms pay a month or more after the work is done.
- A seasonal business has to buy inventory or hire staff weeks before the busy months bring in the sales, which is why we suggest you don't wait for busy season to apply.
- A large order or a new contract needs materials and labor up front, and the customer pays only after delivery or completion, as in most construction financing needs.
- A slow month drops deposits below the fixed costs of rent, insurance and loan payments, even though the business is sound over the year.
- A walk-in cooler, a truck or a roof fails without warning, and the repair cannot wait for next month's receipts.
Some of these gaps close on a known date, when a client pays an invoice or the season arrives. Others have no single payoff event, and the business needs money it can repay from ordinary sales over the following months. That difference decides which product fits.
Types of working capital financing and which one fits when
Four of the five main types are available through Today Capital Group, and the fifth, invoice factoring, is offered elsewhere.
Revenue-based financing (merchant cash advance)
A funder pays you a lump sum in exchange for an agreed amount of your future sales, and you repay it as a share of your daily or weekly sales until that total is reached. The funder sizes the advance on your usual revenue, decides mainly from your bank statements and usually asks for no collateral, which is why it is the fastest form of working capital in our network. Revenue-based financing runs from $5,000 to $2,000,000 and typically funds in one to two business days. It fits gaps with no single payoff date, such as a slow stretch, a repair or a stock purchase, and it works well for owners whose credit is thinner than their revenue.
Business line of credit
A line of credit gives you a limit to draw from as bills come due, and you repay weekly or monthly on what you have drawn. Paid-down amounts become available again. A business line of credit through our network goes up to $250,000, offers often come back within a day, and some programs discount early payoff. It is the natural fit for gaps that close on a known date, such as payroll before a client pays.
Short-term loans
A short term working capital loan is a lump sum repaid in fixed payments over several months to a couple of years, usually daily, weekly or monthly, with interest or a set fee. Banks and online lenders offer them, and they tend to weigh credit and time in business more heavily than a revenue-based funder does. They suit owners who want a fixed payment and a firm end date.
SBA 7(a) working capital loans and CAPLines
The SBA's 7(a) loan program lists short- and long-term working capital among the uses of its loans, which go up to $5 million through participating lenders. On the SBA's types of 7(a) loans page, working capital loans generally run 10 years or less, and interest rates are negotiated with the lender up to SBA maximums tied to the prime rate or another base rate. The same page describes CAPLines, the SBA's umbrella program for short-term and cyclical working capital needs, which includes a Seasonal CAPLine for seasonal increases in receivables and inventory, a Contract CAPLine for the costs of specific contracts, a Builders CAPLine for small general contractors building or renovating property for resale, and a Working CAPLine, an asset-based revolving line. These loans take weeks to close, and when your need can wait, we work on SBA and bank loans too.
Invoice factoring
A factoring company buys your unpaid invoices at a discount, advances most of their value right away and collects from your customers. It suits businesses that sell to other businesses on 30- to 90-day terms and have customers with good payment records. We do not offer factoring, and it is an option elsewhere if your working capital is mostly tied up in receivables.
| Type | Best fit | Typical timing | How you repay |
|---|---|---|---|
| Revenue-based financing | Gaps with no single payoff date, thinner credit, need for speed | One to two business days | A share of daily or weekly sales until the agreed total is paid |
| Line of credit | Repeating gaps that close on a known date | Offers often within a day | Weekly or monthly on what you draw |
| Short-term loan | A one-time need with a fixed payment and end date | Days to a few weeks | Fixed daily, weekly or monthly payments |
| SBA 7(a) or CAPLines | Planned needs that can wait, lowest payment | Several weeks | Monthly payments, generally up to 10 years for working capital |
| Invoice factoring (not offered by us) | Business customers on long payment terms | Varies by provider | Your customers pay the factoring company |
What working capital financing costs, in dollars
The fastest products are priced for speed and for a decision based on revenue rather than collateral, so they cost more per dollar over a short term. The slower ones cost less per year but take longer to arrive. The numbers below are illustrations, and real offers vary widely.
A revenue-based offer is priced with a factor rate. On an example $50,000 advance at a factor rate of 1.30, you repay $65,000, so the money costs $15,000. At about $2,500 a week, that total clears in 26 weeks. Factor rates explained shows how to read the rate, fees and early payoff terms.
A line of credit charges only on what you draw and for as long as it is out, so a $20,000 draw repaid in six weeks costs far less than a $100,000 lump sum held for six months, as our business line of credit guide shows with example draws.
An SBA 7(a) loan is priced with interest. On an example $50,000 working capital loan at 11% interest over 10 years, the payment is about $689 a month, and the interest over the full term comes to about $32,650. The payment is far lower and the term far longer. If you are weighing an advance against a bank or SBA loan for the same need, merchant cash advance vs business loan compares them side by side.
For any of them, set the cost against what the money earns you, such as a contract with $60,000 of margin or a crew kept through a slow month, and check which payment your slowest weeks can carry.
How much working capital to ask for, with an example
The right amount covers your lowest cash point, a cushion, and the payments the funding itself will take before the gap closes. Here is an example for a small commercial contractor. The numbers are made up for illustration.
The contractor starts with $30,000 in the bank. In a normal week, $30,000 comes in and $28,000 goes out, so the account grows by about $2,000. Then it wins a $140,000 job. Materials cost $55,000 in week 1, extra crew and equipment rental add $4,000 a week in weeks 2 through 5, and the client pays 30 days after completion, in week 9.
| Week | What happens | Balance at the end of the week |
|---|---|---|
| 1 | $55,000 of materials paid | Minus $23,000 |
| 2 to 5 | $4,000 a week of extra crew and rental | Falls to minus $31,000 |
| 6 to 8 | Normal weeks, job finished, waiting on payment | Recovers to minus $25,000 |
| 9 | Client pays $140,000 | Plus $117,000 |
- Find the lowest point. Without financing, the account would sit $31,000 short at the end of week 5.
- Add a cushion. If the owner wants at least $10,000 in the account at all times, the bare need is $41,000.
- Add the payments the financing takes during the gap. With an example advance repaid at $2,500 a week starting in week 2, seven payments come out before the client pays, and running the weeks again with those payments shows the owner needs about $52,500 to stay above $10,000, so a request of about $55,000 covers it.
- Compare that with a line. Drawing about $35,000 in week 1 and $3,000 a week through week 5 keeps the account above $10,000, even with example payments of $1,000 a week on the draws, and the owner pays the line down when the $140,000 arrives, paying for each draw only while it is out.
Both approaches work for this job. The line costs less because the payoff date is known, and the advance is simpler if the owner would rather have one lump sum and a set payment from ordinary sales. Asking for much more than the gap adds cost, and asking for less can leave you short in the one week that matters.
What funders read before they make an offer
For revenue-based financing and most lines of credit, the main document is four months of business bank statements. Underwriters look at average monthly deposits, how many days the balance runs low or negative, how steady deposits are from week to week and what other financing payments already come out of the account. Credit counts too, more for some funders than others.
The funders we work with generally look for about a year in business and about $20,000 a month in deposits. If you're not there yet, apply anyway. Some funders work with newer or smaller businesses, and we'll tell you what's realistic. SBA and bank lenders ask for more, including tax returns, a personal financial statement and a debt schedule, and our guide to small business loan requirements lists what each type of financing asks for.
How applying for working capital through Today Capital Group works
You fill in one short application and send your last four months of business bank statements, either as PDF uploads or by connecting your bank read-only. Getting matched does not need a hard credit pull, because most funders prequalify from bank statements and a soft pull, and if a funder wants a hard pull in final underwriting, you know first. Your file goes to the funders in our network that fit your business, and the offers come back side by side.
We go through the offers with you before anything is signed, including whether a line, an advance or an SBA loan suits the gap better. There is nothing to pay to apply or to see offers, and you are under no obligation to take one. Most applicants are funded within one to two business days of choosing an offer.
Start your application with your statements ready, or call (818) 351-0225 to talk through the size of your gap first.
Questions owners ask about working capital loans
What is a working capital loan?
A working capital loan is short-term financing that covers the everyday costs of running a business, such as payroll, rent, inventory and materials, when that money has to be paid before customers pay you. It is repaid from the revenue the business earns afterward.
How does a working capital loan work?
With revenue-based financing, the funder takes a share of daily or weekly sales until an agreed total is paid; with a line of credit, you draw what you need and repay weekly or monthly on what you drew; and with a short-term or SBA loan, you make fixed payments with interest over a set term.
What is the best business loan for working capital?
It depends on the gap you are covering. A line of credit usually fits repeating gaps that close on a known date, revenue-based financing fits urgent needs or gaps with no single payoff date and funds in one to two business days, and an SBA 7(a) loan gives the lowest payment for planned needs that can wait several weeks.
Are working capital loans a good idea?
They are a good idea when the money covers a gap that the business's own revenue will repay, such as payroll before a client pays, stock ahead of a busy season or materials for a profitable job. Size the request to your lowest cash point plus a cushion, and check that the payment fits your slowest weeks.
How to qualify for a working capital loan?
For revenue-based financing and most lines of credit, funders mainly read four months of business bank statements for steady deposits, healthy balances and existing payments, along with your time in business and credit. SBA and bank loans also ask for tax returns, a personal financial statement and a debt schedule.
