What is a working capital loan, and which kind fits your business?
A working capital loan pays for the everyday costs of running a business: payroll, inventory, rent, a seasonal gap or a customer who pays late. It is not meant for buying long-life assets such as equipment or property. Typical working capital loans run 3 to 18 months and $10,000 to $250,000, though that is a typical range, not an offer. The money comes in several forms: a short-term loan, a line of credit, invoice financing, a merchant cash advance, or an SBA 7(a) loan for larger, slower needs. Which one fits depends on how predictable the cost is and how fast you need the money.
Part of our guide to Small Business Loans: Types, Costs and What It Takes to Qualify.
What types of working capital loans are there?
Six: a short-term online loan, a line of credit, invoice financing, a merchant cash advance, an SBA 7(a) loan and an SBA microloan. The fast ones usually cost the most, and the SBA options usually cost the least and take the longest.
Working capital options compared (typical ranges, not offers)
| Option | Typical amount | Cost | Typical speed | Typical term | Typical published floor (lenders' own sites, last checked September 24, 2026) | Best when |
|---|---|---|---|---|---|---|
| Short-term online loan | Varies widely; $10,000 to $250,000 is typical for working capital, and online term loans generally top out around $500,000 (typical range) | 15% to 45% APR (typical range) | 24 to 48 hours (typical range) | Typically 3 to 18 months (typical range) | Published by online term lenders: about 1 year in business and a personal score of about 625 | You know the amount, want a fixed payment and value speed enough to pay for it |
| Line of credit | Varies widely; lines rarely go past $500,000 (typical range) | Priced like an online term loan, and you pay interest only on what you draw (typical range) | 1 to 3 business days (typical range) | Revolving, often renewed each year (typical range) | Published by lenders: online about 1 year and a score of about 625; banks about 2 years and 660 to 700 or higher | The need recurs or comes in uneven amounts, such as seasonal stock or payroll gaps |
| Invoice financing | A share of the invoice, often up to 90% (typical range) | A fee for each period the invoice stays unpaid (typical range) | 24 to 72 hours (typical range) | Until your customer pays the invoice (typical range) | No minimum listed in the published floors we reviewed | You have billed a business customer and are waiting to be paid |
| Merchant cash advance | Varies widely (typical range) | Factor rates roughly 1.1 to 1.5, equivalent to APRs of 40% to 350% (typical range) | Same day to 24 hours (typical range) | Often 6 to 12 months (typical range) | Published by lenders: about 6 months in business and a personal score of about 550 | Speed decides the outcome and cheaper products are closed to you |
| SBA 7(a), including the Working Capital Pilot | Up to $5 million, per the SBA | Interest capped by the SBA at 10% to 13.5% on variable rates as of September 2026, per the SBA | Weeks to months (typical range, not an SBA timeline) | Up to 10 years, or 25 for real estate, per the SBA; the Pilot up to 60 months, per the SBA | The SBA publishes no minimum score; the lender sets its own, and many SBA lenders look for about 650 (typical lender practice, not an SBA rule) | The need is large and planned, and weeks of processing cost you nothing. Guide: SBA 7(a) Loan Requirements, Rates and Terms (2026) |
| SBA microloan | Up to $50,000, per the SBA | Generally 8% to 13%, per the SBA | Weeks (typical intermediary practice, not an SBA timeline) | Up to 7 years, per the SBA | The SBA sets no minimum time in business; the nonprofit intermediary that lends sets its own credit bar | You need $50,000 or less, payroll and other working capital are allowed uses, and you can wait for the price. Guide: SBA Microloans: Who They Actually Suit, and Who They Don't |
Typical ranges, not offers. Only the SBA figures come from a published source; every other cost and speed is a range the market commonly runs, not a commitment. Floors are the minimums lenders publish on their own sites, last checked September 24, 2026, and they change. See Business Loan Requirements by Lender (2026) for the full list.
The 7(a) row includes the SBA's Working Capital Pilot: monitored lines of credit within 7(a), up to $5,000,000 and 60 months, aimed at industries such as manufacturing, wholesale or professional services, for businesses with at least one year of operating history, per the SBA.
What can you use a working capital loan for, and what shouldn't you?
Use it for costs that are temporary or that pay for themselves soon: payroll through a gap, inventory before a busy season, receivables you are waiting on, or a short emergency. Skip it for long-life assets and for covering ongoing losses.
Buying equipment or property is a poor fit. Equipment financing usually costs less than an unsecured loan because the equipment secures it, and How does equipment financing work, and what does it really cost? explains how it works. Fit-out, wiring and plaster are the exception, since they cannot secure anything and need working capital.
Ongoing losses are a poor fit too. Borrowing does not fix a business that spends more than it earns, and the repayment adds to what goes out each month.
How much working capital can you borrow?
It depends on who lends: online lenders commonly size a loan at 1 to 1.5 times monthly revenue, and banks and SBA lenders size it from cash flow. The revenue multiple is a commonly quoted rule of thumb, not a published lender figure. For a bank or SBA loan, many lenders look for monthly cash flow after expenses of about 1.25 times the new payment.
At that rule of thumb, a business with $10,000 a month in revenue, a credit score of 620 or better and at least 12 months in business is looking at about $10,000 to $15,000 from an online lender.
Say what the money is for. A defined use of funds underwrites better than an open ended one, and "working capital" alone is the vaguest answer an application can give. Run your own numbers in the Business Loan Calculator: Monthly Payments and How Much You Can Borrow.
What credit score do you need for a working capital loan?
It depends on the product, because lenders publish very different minimums. Published floors, last checked September 24, 2026:
- Merchant cash advance: about a 550 score and 6 months in business.
- Online term lenders: about 625 and 1 year in business.
- Bank lines: 660 to 700 or higher and about 2 years in business.
- SBA: no minimum score published by the SBA; the lender sets its own bar.
A floor only means you can apply. Lenders also weigh cash flow, existing debt and how steady your deposits are, and published revenue floors run from $3,000 to $20,000 a month. Under 600? Can you get a business loan with bad credit? covers what is realistic.
How fast can you get a working capital loan?
From same day to months, depending on the product, and the faster ones usually cost more. Typical speeds, not commitments:
- Merchant cash advance: same day to 24 hours.
- Online term loan: 24 to 48 hours.
- Line of credit: 1 to 3 business days.
- Invoice financing: 24 to 72 hours.
- SBA: weeks to months.
A decision can come faster than the money. Some lenders can decide the same day once they have your full application with bank statements, and the clock starts at that full application, not at the first form you fill in. Business Loan Approval Times by Product (2026) goes product by product.
What does a working capital loan cost?
It depends on the product, from about 15% to 45% APR on an online term loan to factor rates of roughly 1.1 to 1.5 on an advance, which work out to an APR of roughly 40% to 350%. A line of credit is priced like an online term loan. Invoice financing charges a fee for each period an invoice stays unpaid. Those are typical ranges, not quotes. The SBA caps 7(a) interest at 10% to 13.5% on variable-rate loans as of September 2026, and SBA microloans generally run 8% to 13%, per the SBA.
Here is $50,000 over 1 year, so the dollars line up:
| Example only, not an offer, fees left out | Payment | Total cost |
|---|---|---|
| Term loan at 12% APR, repaid over 1 year (example rate) | $4,442 a month | $3,309 in interest |
| Term loan at 30% APR, repaid over 1 year (example rate) | $4,874 a month | $8,492 in interest |
| Term loan at 45% APR, repaid over 1 year (example rate) | $5,251 a month | $13,007 in interest |
| Advance at a 1.35 factor rate, $67,500 repaid in total (example rate) | About $536 a business day over 6 months, or $268 over 12 months | $17,500 in cost |
The total repayment in dollars is the number to compare. A factor rate of 1.35 looks like 35% beside an APR, but it is charged over a much shorter window, so the annualized figure is far higher. Early repayment usually saves interest on a term loan and usually saves nothing on an advance, because the cost was fixed on day one. What Business Financing Costs explains each measure, and the Business Loan Calculator: Monthly Payments and How Much You Can Borrow runs your own. How does a merchant cash advance work, and what does it really cost? goes deeper on advances.
What is the payment on a $1,000,000 working capital loan?
A $1,000,000 working capital loan costs $13,215 a month over 10 years at 10%, or $21,247 over 5 years at 10%. At this size you are in SBA or bank territory, not short-term online lending, because online term loans generally top out around $500,000.
The 10-year figure uses the SBA's 10% cap on variable-rate 7(a) loans above $350,000 as of September 2026, and the 5-year figure uses an example 10% rate. Both are examples, not offers, and fees are extra.
The SBA's 7(a) Working Capital Pilot offers monitored lines of credit up to $5,000,000, with terms up to 60 months, so it reaches this size.
| Example only, not an offer, fees left out | Monthly payment | Total interest |
|---|---|---|
| $1,000,000 over 10 years at 10%, the SBA 7(a) variable-rate cap above $350,000 as of September 2026 | $13,215 | $585,809 |
| $1,000,000 over 5 years at 10%, an example rate | $21,247 | $274,823 |
Working capital loan or line of credit?
A loan suits a known, one-off need, and a line suits a need that recurs or comes in uneven amounts. A loan charges interest on the full amount from day one, while a line charges interest only on what you draw, and repaid draws free up again. If you would have to guess the amount, a line is usually the safer fit, but check the fees, because maintenance, draw and non-use fees are common. Business Loan vs Line of Credit: Which Is Better for Your Small Business? compares them in full, and How does a business line of credit work, and can your business get one? explains how draws, fees and renewal work.
What do business owners actually ask to borrow for?
Mostly for growth and for assets: 34.4% say business expansion, 29.0% equipment and 7.6% debt consolidation. These are self-reported, unverified shares of businesses that applied through TopFunders.ai, so they describe demand, not approvals or funding.
| Purpose | Share of applicants |
|---|---|
| Applicants who say they are borrowing for business expansion (self-reported, unverified) | 34.4% |
| Applicants who say they are borrowing to buy equipment (self-reported, unverified) | 29.0% |
| Applicants who say they are borrowing for debt consolidation (self-reported, unverified) | 7.6% |
Close to three in ten requests are for a specific asset, and for those, equipment financing is usually the cheaper route, because the equipment secures it. If part of what you need is an asset, finance that part separately and keep the working capital loan for everyday costs. Method: TopFunders Small Business Funding Study.
Frequently asked questions
What is a working capital loan?
A working capital loan pays for the everyday costs of running a business: payroll, inventory, rent, a seasonal gap or a customer who pays late. It is not meant for buying long-life assets. It comes as a short-term loan, a line of credit, invoice financing, a merchant cash advance or an SBA 7(a) loan.
What credit score do you need for a working capital loan?
It depends on the product, because lenders publish very different minimums. Published floors run from about 550 for a merchant cash advance to about 625 at online term lenders and 660 to 700 or higher for bank lines. The SBA publishes no minimum score for 7(a), and each lender sets its own.
How much working capital can I get?
It depends on who lends: online lenders commonly size a loan at 1 to 1.5 times monthly revenue, and banks and SBA lenders size it from cash flow. The revenue multiple is a commonly quoted rule of thumb, not a published lender figure, and credit, existing debt and time in business move the result.
How fast can I get a working capital loan?
From same day to months, depending on the product, and the faster ones usually cost more. A merchant cash advance is typically same day to 24 hours, an online term loan 24 to 48 hours, a line of credit 1 to 3 business days and SBA financing weeks to months. These are typical speeds, not commitments.
Can a new business get a working capital loan?
Sometimes, with narrower options. Published floors start around 6 months in business for a merchant cash advance and about a year at online term lenders, and an SBA microloan sets no minimum time in business. Equipment financing can work when the money buys an asset. Can you get a business loan in your first year? shows what is reachable.
Is a working capital loan secured?
Usually not. A working capital loan is typically unsecured, meaning no collateral is pledged, though most lenders still ask for a personal guarantee, which makes you personally responsible if the business cannot repay. Invoice financing is borrowed against your invoices. What Is an Unsecured Business Loan and Is It Right for You? explains the tradeoffs.
What is the payment on a $1,000,000 loan?
A $1,000,000 working capital loan costs $13,215 a month over 10 years at 10%, or $21,247 over 5 years at 10%. Those are examples, not offers: the lender sets the rate and term, and fees are extra. At this size the money usually comes from a bank or the SBA, since online term loans generally top out around $500,000.
Not sure which working capital option fits your business?
Answer a few questions and see the lending partners ready to make your business an offer. Checking your options doesn't affect your credit. TopFunders.ai is not a lender and not a loan broker, and the partners you see depend on your answers.
See the lending partners ready to make your business an offer
TopFunders.ai is not a lender, not a loan broker, and does not originate, underwrite, price or fund loans. We make no credit decisions. A match is not an approval: each partner makes its own decision and sets any amount, rate and terms. Costs, speeds and amounts are typical ranges unless marked as published, and lenders change their terms. Minimum scores, time in business and revenue are as published by lenders and last checked September 24, 2026. Percentages from our applicant data are self-reported and describe demand, not approvals.
Sources
- SBA, 7(a) loan program, including the 7(a) Working Capital Pilot (read October 4, 2026)
- SBA, microloan program
- Lender minimums: each lender's own website, read September 24, 2026 (named table in Business Loan Requirements by Lender (2026))