How a working capital loan works
The lender advances a lump sum and the business repays a fixed total over a short term by weekly or monthly ACH debit. Most working capital loans from online lenders are priced as a fixed payback rather than interest on a declining balance, which makes them closer to an advance than to a bank loan in structure, but with a longer term and less frequent payments. They are unsecured apart from a personal guarantee and a UCC lien, and they can often be renewed once a portion is repaid.
The name describes the use, not a legal category. What separates a working capital loan from a merchant cash advance is the weekly or monthly payment and the loan form; what separates it from a term loan is the term, which rarely exceeds two years, and the pricing.
What working capital loans cost
Published pricing in September 2026 runs from about 1.10 to 1.40 as a factor on the amount, over 3 to 24 months, plus origination fees of 1 to 5 percent. On $40,000 at 1.20 over 12 months, the payback is $48,000 and the weekly payment about $923. Because the term is short, annualised cost is high, though below a daily advance for the same factor.
| Factor | Term | Total payback | Weekly payment (approx.) |
|---|---|---|---|
| 1.12 | 6 months | $44,800 | $1,723 |
| 1.20 | 12 months | $48,000 | $923 |
| 1.30 | 18 months | $52,000 | $667 |
| 1.40 | 24 months | $56,000 | $538 |
| Product | Typical amount | Time to fund | Cost (market range) | Minimums |
|---|---|---|---|---|
| Working capital loan | $5,000 – $250,000 | 1 – 2 business days | APR roughly 15% – 60%; short-term products may quote a factor rate instead | 6 months in business; 550+ typical |
| Merchant cash advance | $5,000 – $500,000 | Same day to 2 business days | Factor rate 1.15 – 1.49 (paid as a fixed amount, not interest) | 6 months in business; 500+ (revenue matters more than score) |
| Business line of credit | $10,000 – $250,000 | 1 – 3 business days to open; draws often same day | APR roughly 10% – 60%; some lenders price as a weekly fee on the drawn balance | 6 – 12 months in business; 600+ typical |
| Business term loan | $10,000 – $500,000 | 1 – 3 business days (online lenders) | APR roughly 8% – 45% depending on credit, revenue and term | 1 – 2 years in business; 600+ typical; 640+ for better pricing |
| Invoice factoring | $10,000 – $5,000,000 (70% – 90% advance on eligible invoices) | 1 – 3 business days after setup | Factoring fee 1% – 5% of the invoice per 30 days | No minimum in many cases; the customers' credit matters most; Owner credit is secondary to customer credit |
Who qualifies
Six months in business, roughly $10,000 or more in monthly deposits, and personal credit from about 550 are the usual floors. As with every bank-statement product, what decides the offer is the statement quality: deposit consistency, average daily balance, negative days and NSFs, and existing positions. A file with one or two years of history, credit above 620 and clean statements should look first at a line of credit or a term loan, which cost less; the working capital loan is the right product when speed matters or when the file is not yet there.
Have this ready
Working capital application file
- Four to six months of business bank statements
- Driver’s licence for each owner
- Voided business check
- Formation documents and EIN
- Existing loans and advances with balances
- A one-line use of funds
Best uses and the alternatives
Payroll ahead of a receivable, seasonal inventory, a tax deadline, an insurance down payment, a repair that keeps the business open, or a supplier discount worth more than the cost. For recurring gaps a line of credit is cheaper, because you pay only on what you draw and the capacity refills. For a business that invoices other businesses, factoring converts the receivable itself. For anything long-lived, a term loan’s lower cost and longer term win.