Best Working Capital Loans in December 2025
A working capital loan can help finance short-term or ongoing business expenses
What is a working capital loan?
A working capital loan is a catch-all term for short-term small business financing. With its flexible nature, working capital funding is an ideal fit for businesses looking to overcome cash flow gaps, cover unexpected expenses or secure cash to expand their operations.
The repayment structure and timeline will vary depending on your loan type. Some lenders may require daily or weekly payments from your credit card sales or direct payments from your business checking account.
Types of working capital loans
Working capital loans for small businesses can cover operating expenses like payroll, daily costs, inventory and more. Types of business financing to consider for your working capital needs include:
Short-term business loans
Term loans provide a lump sum of cash upfront for working capital purposes. Maximum amounts typically range from $250,000 to $1.5 million or higher, with repayment terms typically lasting three to 24 months.
Business lines of credit
If you need frequent cash infusions, a working capital line of credit is a form of flexible financing that lets you borrow as little or as much as you need, up to your credit limit. You only pay interest on the amount you withdraw.
Merchant cash advances
Though technically not a loan, a merchant cash advance (MCA) is an alternative form of business financing that offers a lump sum in exchange for a percentage of your business’s future earnings (commonly, your credit card sales). You can repay with a portion of daily or weekly credit card sales. However, the factor rate can make this a more expensive option.
SBA loans
The Small Business Administration offers long-term working capital loans through its popular 7(a) loan, which can be used to cover a wide range of expenses. SBA loans offer favorable terms and large loan amounts to help you fund your various business needs.
Pros and cons of working capital loans
Pros
- Flexible funding for a wide range of business purposes
- Quick funding from some online lenders
- Accessible to a wide range of businesses with varied minimum requirements
Cons
- Interest rates can be high, especially with factor rates
- Some lenders may require daily or weekly payments
- Collateral or personal guarantee may be required
How to get a working capital loan
The process for applying for working capital financing varies by loan type and lender. However, here are the steps you will likely need to take to get a small business loan:
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Decide how much you need
Write a list of your company’s most urgent needs and estimated operating costs. Consider whether you need the funds upfront or prefer ongoing access to cash on an as-needed basis. Use our business loan calculator to estimate your borrowing power, making sure the weekly or monthly payments are within your budget. -
Determine your eligibility
Lenders will typically list their business loan requirements on their website. Factors that determine your creditworthiness usually include your credit profile (your personal FICO Score and business credit score), time in business and annual revenue. Some working capital loans also require a personal guarantee or collateral, such as with secured business loans. -
Compare small business lenders
You can apply for a working capital loan with a traditional bank, credit union or an online business lender. Compare interest rates, repayment terms and additional fees to find the best loan option for your business needs. -
Gather required documents
Having essential documents ready can help speed up the application process. You will likely need a business plan, personal and business bank statements, personal and business tax returns and any applicable business licenses. -
Submit your application
The application process is typically quick and automated, often done online. Your lender may reach out to you for additional information and next steps.
Net working capital refers to the amount of money you have readily available to cover your operational expenses and business debts. To calculate your net working capital, subtract your liabilities (what you expect to spend on ongoing expenses like inventory, payroll, taxes and debt payments) from your current assets (the cash that is currently available in your business bank account plus any outstanding customer payments.)
If the result is a positive number, it usually means you have the funds needed to support your ongoing operations and potentially invest in business growth. Though some fluctuation is normal, negative net capital could mean that your liabilities exceed your current assets — and a working capital loan might help bridge the gap.
That being said, taking out a new loan will add to your liabilities, so it’s important to avoid borrowing more than you can realistically afford to repay. Otherwise, you could end up in a dangerous debt cycle that hurts more than it helps you.
How to compare working capital loans
If you receive multiple working capital loan offers, consider the following factors when picking the loan that best fits your needs:
Interest rate
Working capital loan rates can vary depending on the loan type and lender. Factor rates may be involved, which can make your interest payments higher.
Additional fees
Some working capital lenders add origination and late fees, as well as prepayment penalties. These additional fees can significantly increase the loan’s overall cost.
Repayment term
Your repayments may start immediately and have very short terms. To reduce the risk of default, make sure you can afford to repay the debt by the scheduled date(s).
Loan amounts
While you want the approved amount to cover your necessary expenses, it’s important to avoid borrowing more than you need, as that can be unnecessarily expensive.
Time to fund
How soon you need funds can determine which working capital business loan is best for you. For urgent needs, consider same-day business loans. If you can wait, you’ll likely get better rates and terms with an SBA or traditional bank loan.
Lender support
Some lenders offer free business support and coaching as part of the loan process, which may be helpful if you’re still getting your business off the ground or if you’re looking for ways to expand.
Our in-depth catalog of small business lender reviews is a great way to compare business loan options before signing on the dotted line.
Alternatives to working capital loans
While working capital loans can be a great way to cover a range of everyday business expenses, they might not be the best fit for every company. Here are some other ways to get the capital you need to keep your business afloat.
Business credit cards can cover low-cost expenses while helping you rack up some generous rewards. Qualifications are usually more lenient than traditional small business financing, but watch out — credit card interest rates can go quite high. Because of this, it’s best to use business cards sparingly, making sure to pay off the balance each month.
Typically offered by the federal, state and local governments, small business grants can help you access free money for your company. Some private corporations also offer grants or business sponsorships. While these opportunities can be competitive, it can still be worth the time and effort to apply.
Crowdfunding platforms, like GoFundMe for business, can help you raise donations via friends, family and the general public. It’s free to launch a campaign, though the crowdfunding platform typically takes a small cut for their service. Businesses with a strong online presence that can provide a discounted product or service tend to have better success rates with crowdfunding campaigns.
Frequently asked questions
Ultimately, deciding whether a working capital loan makes sense for your business is a matter of personal choice. However, if you need short-term funding to cover unexpected expenses or to help your operations expand, this type of loan may be a smart option.
The rates on working capital loans can vary widely by lender. However, it’s possible to get a favorable rate, especially if you have a strong financial profile.
Generally, when people talk about working capital loans, they’re referring to a short-term business loan. However, in some cases, it’s also possible to take out a line of credit to cover your working capital expenses.
Our methodology: How we chose the best working capital loans
We reviewed more than 20 lenders to determine the overall best working capital loans. To make our list, lenders must meet the following criteria:
- Minimum time in business: Both new and established businesses may find themselves in need of a working capital infusion, so we looked for lenders with a wide range of time-in-business requirements, though most require businesses to be in operation for at least a year.
- Loan amounts: We prioritized lenders with no restrictions on how borrowers can use their loan funds, with funding amounts ranging from $5,000 to $5 million.
- Rates and terms: We selected lenders with competitive fixed rates, fewer fees and flexible repayment terms lasting a minimum of three months.
- Repayment experience: We considered each lender’s overall reputation and business practices, favoring lenders that report to all major credit bureaus, offer reliable customer service and provide unique perks to customers, like free business coaching or early payoff discounts.