Best Working Capital Loans for Small Businesses of 2018
For small businesses, having enough working capital is important for covering daily expenses, including payroll, inventory and accounts payable. Businesses that suffer from cash flow gaps can turn to both traditional and alternative lenders to meet their funding needs. We reviewed over several dozen lenders and loan programs to help you find the best working capital loans for your small business.
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Best Working Capital Loans for Bad Credit
Even if you have a less than perfect credit score, it’s still possible to get a working capital loan for your business. Below, we list some of the best lenders that require no minimum credit score to apply.
If you’re looking for a working capital line of credit, Kabbage is a great option as there are no credit requirements to qualify. This lender only requires one year in business and annual revenue of $50,000 to qualify for a line of credit up to $100,000. For lines up to $150,000, you'll need to be in business three years with $500,000 in annual revenue. Kabbage will also evaluate your business’s online data (banking, social media, vendor accounts), so borrowers with low credit scores but financially health businesses can qualify for larger loan amounts. You can borrow up to $150,000 with six- or 12-month terms, making this line of credit a good choice for short-term working capital needs. Another benefit to using Kabbage is the quick funding times: one to three business days to fund to a bank account and as fast as the same day to a PayPal account.
PayPal Working Capital loans are good for small business owners who use PayPal to process most of their sales. To qualify for this loan, you must have been using a PayPal business or premier account for at least three months, and you must make at least $15,000 to $20,000 in yearly sales through PayPal. You can borrow up to 18% of your sales in the past year, up to a maximum of $97,000. Once approved for a loan, you can get funds almost instantly to your PayPal account.
The repayment schedule is also hassle-free: you choose a fixed percentage of your daily PayPal sales for automatic repayment, meaning you don’t have to worry about making a lump-sum payment each month. On slow sales days, you’ll contribute less towards your loan repayment (and you won’t repay on days you don’t make sales). Your loan won’t come with specific terms; instead, you’ll need to repay within 18 months. APRs range between 15% and 30% for PayPal Working Capital loans, which is lower than some of the other lenders in this list.
Another great option for business owners with thin or lower credit scores is Fundbox. Fundbox offers both invoice financing and lines of credit up to $100,000, and there are no hard credit score requirements to qualify. Instead, you'll need to be in business at least three to six months, depending on the product you choose, and demonstrate some revenue (at least $25,000 for a line of credit and some revenue for invoice financing over $30,000). There are also requirements on recent bankruptcies and your use of accounting software and your business bank account. One thing we like about Fundbox is the company offers very reasonable APRs given that it doesn't have stringent eligibility criteria. APRs range from 15% to 59% for a line of credit and 13% to 60% for invoice financing.
Invoice financing at Fundbox also works differently than traditional factoring. When you clear an unpaid invoice with Fundbox, you'll receive a 100% advance on the invoice, and you, the business owner, will be responsible for repaying this plus fees over 12 or 24 weeks. This means you don't have to set up a separate account for your customers to pay the factoring company -- something that some business owners may prefer. To use Fundbox, you'll need to use eligible accounting software, which includes QuickBooks Online and Desktop, FreshBooks, Harvest, PayPal, Xero and Clio.
If you’re looking for a short-term loan, Credibly offers affordable working capital loans with lower APRs and large loan amounts. With Credibly, there are no credit score, collateral or personal guarantee requirements, making the lender a good choice for an unsecured loan, and you can borrow up to $250,000–the most of any lender in this category. To qualify for a working capital loan, you’ll need to be in business six months with $10,000 in monthly revenue and bank account deposits. APRs are also lower than the other lenders in this section at 10% to 36% (though they may be higher if your credit score is very low). Once approved, you can receive funds in as quickly as 48 hours.
Best Working Capital Loans for Good Credit
Borrowers with good to excellent credit scores will be able to qualify for affordable working capital loans and lines of credit from banks and credit unions.
While most small business owners are familiar with 7(a) loans, the SBA also offers an excellent line of credit program that lets you borrow up to $5 million with low interest rates. The CAPLines program allows you to borrow money working capital needs and other purposes, with up to 85% of the loan guaranteed by the SBA. Interest rates are the same as with a standard 7(a) loan and they are capped at competitive rates ranging from 6% to 8%. This program also comes with terms up to 10 years, making it a wonderful long-term solution for your business. You’ll need to apply through a bank or credit union, and you’ll typically need a good to excellent credit score and financially sound business to qualify.
- 6.00% - 8.50% interest rates (may be lower)
- Terms up to 10 years
- Stricter eligibility requirements
- Lines up to $5 million
- Funds in several weeks to months
Bank Loan or Line of Credit
A bank is another great place to get a working capital loan, especially if you already have a banking or borrowing relationship there. Most banks and credit unions offer standard term loans and lines of credit for small businesses, and while qualifying will depend on the bank, you will need both a strong personal and business credit score as well as strong business financials. For those that can qualify, bank loans have some of the lowest APRs and most competitive terms: you can usually borrow up to several million dollars and pay back the loan over five to 25 years. While funding normally takes several weeks, some banks, such as Wells Fargo and PNC, have started offering online loans with approval in a few days.
- Low APRs
- Terms up to 5 to 25 years
- Strict eligibility requirements
- Loans up to several million
- Funds in several weeks to months
Best Working Capital Startup Loans
If you need working capital funds for your startup, you have a variety of options available. Below, we evaluate some of the best working capital loans for new businesses.
If you think you won’t be able to qualify for an SBA loan with a startup, think again. The SBA offers a special type of loan called the Community Advantage loan designed for underserved and new businesses. You can borrow up to $250,000 for working capital or other needs with a maximum interest rate of 9.75%, which are great terms for new businesses. If approved, you’ll also have access to assistance and services for your business, including accounting, payroll, business plan preparation and marketing. This is one of the more affordable and comprehensive financing options available to new entrepreneurs, provided you have a good enough credit score to qualify.
Kiva is a great option for a working capital startup loan if you have a less than perfect credit score. Through Kiva, you can borrow up to $10,000 for your startup with no interest. There are no credit requirements to qualify, but you’ll need to be at least 18 years old, based in the U.S., have a PayPal account and not be currently in bankruptcy. Because Kiva is a marketplace lender, you’ll need to provide a compelling pitch and story to secure the interest of lenders. Typically, you’ll be granted a specific loan amount based on the age of your business: up to $1,000 for ideas, up to $5,000 for businesses in operation less than 90 days, and up to $10,000 for businesses generating revenue. However, you may be able to qualify for more depending on your application.
- 0% interest rates
- Terms up to 3 years
- Lenient eligibility requirements
- Loans up to $10,000
- Funds in 6 weeks
Summary of Best Working Capital Loans
For quick comparison, we’ve summarized the best working capital loans, lines of credit and lenders for small businesses in the table below.
|Borrowers with low credit scores|
|Borrowers with good credit scores|
|Startups and new businesses|
What to Consider When Getting a Working Capital Loan
Working capital loans are meant to cover short-term expenses and cash flow gaps. If you know that your business has a seasonal business cycle, you may want to consider taking out a working capital loan or line of credit during those months with low sales to cover your daily expenses. For a busy season, you may want to prepare by purchasing more inventory or hiring more employees. You should also consider working capital loans when you need those extra funds to help expand your business or jump start new initiatives.
Whether you choose to use a bank or online lender depends on what you need for your business. With online lenders, borrowers typically receive funds within a few days, and they don’t necessarily need to pay their loans over a few years. Some repayment options leave businesses debt-free within a few months, and owners can choose to use the funds for a variety of business needs. Unfortunately, this typically means higher APRs and less time to get the cash to repay a short-term loan. Banks can offer much larger lines of credit up to several million dollars with better terms, making them a good option for established businesses that have higher operating expenses. However, banks have stricter requirements and a more complicated application process, so you may not receive funds for several weeks.