Methodology
We evaluated 13 online small business lenders, focusing on key areas such as affordability, loan options, underwriting requirements and customer experience. Our top-rated working capital loan lenders are a subset of our best small business lenders—the top online business lenders offering working capital loans. Advertisers and partners don’t influence our ratings, as our research and editorial team maintains independence in using data-driven methodologies.
Learn more about how Buy Side rates the best small business loans.
Tips for comparing working capital loans
Most business lenders offer loans for working capital. Pay attention to the factors most likely to benefit you and your company when comparing working capital loans.
- Loan amount: Verify the maximum loan amount you can get from a lender. For example, it doesn’t make sense to apply with a lender whose maximum loan amount is $250,000 if you need $500,000 in working capital to fund your operations.
- Loan cost: Compare loan costs. Doing so can be challenging because business loans sometimes use a factor rate instead of an interest rate. However, you might be able to convert a factor rate to an annual percentage rate (APR) to better compare costs.
- Time to fund: Many online business lenders can approve and fund your working capital loan within one business day. If you’re in a time crunch, a fast business loan might make sense. If you have more time, however, a lower-cost business loan from a bank or a Small Business Administration (SBA) loan might better meet your needs.
- Repayment terms: Determine whether weekly or monthly payments would work better with your cash flow requirements and confirm that your desired lender offers terms that suit you. Consider revenue-based financing for working capital and whether it makes sense to choose daily payments based on your sales.
- Business criteria: Most lenders expect your business to meet certain criteria. Compare requirements for minimum annual revenue, expected time in business and industry. If you’ve been in business for six months, you won’t qualify for a loan from a lender that requires 12 months of operation.
- Customer service: Find out whether the lender offers you help to determine which loan is best for you and if it walks you through the application process.
How do working capital loans work?
Like other types of debt, working capital loans offer you upfront cash, and you repay what you borrowed over time with an added cost.
Many working capital loans are unsecured, meaning you don’t need to provide collateral that the lender can claim if you default. However, you might have to provide a personal guarantee, allowing the lender to sue you for your personal assets if you stop making payments.
When you get an SBA loan or a bank loan for working capital, you typically have a longer repayment term. On the other hand, if you choose an online alternative lender, you generally receive short-term financing, meaning you need to repay the loan within two years.
Related: How Do Business Loans Work?
What is working capital used for?
Working capital is the cash you have when you subtract your business liabilities from your assets. It represents the money you have on hand to cover your day-to-day obligations. If you don’t have enough working capital available to meet your needs, a working capital loan can help smooth your cash flow.
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