What a Working Capital Loan Is
A working capital loan is designed for operations—payroll, inventory, marketing, rent, and the everyday costs that keep the lights on. It’s not “fun money.” (Your accountant won’t laugh if you treat it like that.)
How It Typically Works
- Often faster than SBA underwriting.
- Amounts and pricing are usually based on recent revenue and deposits.
- Repayment can be monthly, weekly, or sometimes daily depending on product type.
Best Use Cases
- Inventory purchases before a busy season.
- Bridging a gap between invoice timing and expenses.
- Covering short-term payroll needs while receivables catch up.
When a Line of Credit Might Be Better
If you need flexibility repeatedly, compare with a business line of credit. A revolving line can be better than stacking multiple short-term loans.
What to Watch (So It Doesn’t Hurt Your Cash Flow)
- Payment frequency: daily payments can strain cash flow.
- Total payback: focus on total cost, not just “payment size.”
- Stacking debt: multiple short-term loans can snowball fast.
FAQ
Is working capital the same as an MCA?
No. “Working capital” describes the purpose. An MCA is a specific product type (often expensive) that may be marketed as working capital. Always ask what product you’re actually being offered.
Note: Educational content only—not financial advice.
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