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 | Amount to discuss | Time to fund | Pricing structure | Eligibility review |
|---|---|---|---|---|
| Working capital loan | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Quoted interest or factor pricing and fees; compare the complete payment schedule | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Merchant cash advance | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Contracted remittance amount and fees; a factor rate is not APR | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Business line of credit | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Interest or installment fees by provider; check draw and maintenance charges | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Business term loan | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Quoted interest and fees; compare net proceeds and total repayment | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Invoice factoring | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Contracted invoice fee, fee period, reserve and any additional charges | Provider assesses business and eligible invoices; Customer and owner checks depend on the agreement |
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.