As the old saying goes, “You have to spend money to make money.” That means you need to have working capital on hand to pay the operating costs of your business so it can keep generating revenue.
Working capital is used to pay for operational costs such as rent, employee payroll and short-term debt payments (like day-to-day credit card expenditures).
Working capital is a measure of both a company’s efficiency and its short-term financial health. Working capital is calculated as a company’s current assets minus its current liabilities. Put simply, you want to have more cash on hand than you do bills to pay.
Every industry has unique seasonal dips in revenue, which affect the amount of working capital available for your business. If you find yourself in need of a loan to see you through one of these periods, we’ve developed this guide for the best working capital loans of 2018, and where to find them:
What it does: The company was created to support and empower small businesses. It’s become known as one of the foremost secure financing services that business owners everywhere can rely on.
Why it’s good: For businesses that make six figures a year, a lump-sum term loan from OnDeck can provide fast access to working capital. You need a personal credit score of 500 or more and must be able to prove you have at least $100,000 annually in revenue. This lender is especially useful for borrowers with better credit. The lower your score, the higher your annual percentage rate (APR) will be.
What it does: The founders of Funding Circle created the company based on a big idea: revolutionizing what they consider to be the outdated banking system and secure a better deal for everyone.
Why it’s good: If you need to make large purchases (and fast), Funding Circle is one of the best options out there. Its APRs start at 7%, but depending on your credit score and history, can go as high as 36%, so make sure you know what you’re getting into. To qualify for loans with it, your business needs to have been established for at least two years and you need to have a personal credit score of at least 620. There is no minimum annual revenue needed to be considered.
What it does: Kabbage offers a fully customizable and comprehensive lending platform that can be configured to fit your organization, allowing you to use the power of data to rapidly underwrite and monitor millions of customers. According to their website, “Technology that would take you years to develop is adapted to meet your needs within weeks or months, providing additional revenue with the ability to scale without requiring a staff of analysts.”
Why it’s good: Kabbage is especially for small businesses that need a little help staying afloat, offering a wide range of working capital loans for business owners who have a personal credit score of at least 500 and bring at least $50,000 in revenue each year. This is one of the fastest and most convenient lenders on our list, but that comes at the cost of higher than average APRs on its loans. Weigh your options carefully.
What it does: Bitbond is the first online lending platform to leverage Bitcoin technology to connect creditworthy borrowers with investors.
Why it’s good: As one of the most innovative peer-to-peer lending platforms, Bitbond is great for business owners looking for instantaneous cash. Bitbond doesn’t require a bank account to make a deposit, so in addition to a super-fast loan application process, you don’t have to wait for an ACH money transfer after the loan has been approved. Plus, because Bitcoin isn’t limited by national borders, you can accept a loan from any lender in the world without being hit by added foreign exchange fees.What it does: LendingClub bills itself as the “world’s largest online credit marketplace, facilitating personal loans, business loans and financing for elective medical procedures.”
Why it’s good: If you just need a small amount of working capital (no more than $40,000), you might be tempted to just use a credit card. But LendingClub could be a great option for fast access to cash and low rates. Its APRs are as low as 5.99%. Just note that you need to have a personal credit score of at least 600.
What it does: Balboa Capital is a technology-driven financing company that specializes in small business loans, among other types of lending.
Why it’s good: Balboa Capital focuses on working with small businesses. When you apply for a loan with it, you’re not just asking for x amount of money — it wants to know what you need it for, and tailors its products accordingly. Loans are broken down into categories like equipment financing, franchise financing and business financing, and for substantial amounts
What it does: Some banks appear to have become too big to provide funding for the small businesses that need it most. Smartbiz was created to bridge the gap between the small businesses of America and the hundreds of billions of dollars of funds left on the sidelines.
Why it’s good: Smartbiz provides U.S. Small Business Administration loans to borrowers with APRs in the super tight margin of 8% to 8.7%. These loans are granted to business owners needing to cover everything from an equipment purchase to a minor expansion project. Your business needs to have been in operation for at least two years and have $50,000 or more in annual revenue.
Finding the right working capital loan
Much of this comes down to your unique situation: your credit score, your annual revenue, how long your business has been established and how much money you need.
With this in mind, take a closer look at the lenders we recommend in this article on our business loans review page, where you can compare rates, terms and other conditions side-by-side, and read feedback from other entrepreneurs who have used their services.