A working capital loan pays for the cost of running the business between the day money goes out and the day it comes back in. Payroll, rent, a supplier invoice, a seasonal stock-up: the business is healthy, but the cash is not there yet.
It is the most common reason small businesses borrow. In the Federal Reserve Banks' 2026 Report on Employer Firms, 56% of firms that applied for financing did so to meet operating expenses, ahead of every other reason.
This guide covers the main types, what they really cost, who qualifies and how to apply. If you already know you need funding, see what you qualify for on Loanistry.
What a working capital loan is
A working capital loan is financing used for short-term operating costs rather than for buildings or long-lived equipment. Working capital is the gap between what the business has coming in soon (cash, receivables, inventory) and what it owes soon (payroll, rent, suppliers). When that gap turns negative for a while, a loan bridges it.
"Working capital loan" describes the purpose, not one product. Lenders fund it in several ways:
- Short-term online term loans. One lump sum, repaid daily, weekly or monthly over a year or two.
- Business lines of credit. A limit you draw on, repay and draw again, paying only on what is out.
- SBA 7(a) loans and programs. Government-guaranteed loans from banks and other lenders, with longer terms and capped rates.
- SBA Microloans. Up to $50,000 from nonprofit intermediaries.
- Sales-based financing. Repaid as a share of daily card sales, such as merchant cash advances and some processor loans.
How each type works
Online short-term loans
You get the full amount at once and repay it on a fixed schedule over a short term. OnDeck, for example, offers term loans "from $5K - $400K" with a "24-Month maximum repayment term" and "predictable daily or weekly payments," and reports an average APR of 53.2% for term loans originated in the half-year ending June 30, 2026 (OnDeck). Bluevine offers lump sums "up to $500K" from its lending partners "with predictable repayment terms up to 24 months" (Bluevine).
The fixed schedule makes budgeting easy. The trade-off is cost, and the speed of the repayment: daily or weekly debits start almost immediately.
Lines of credit
A line lets you borrow only what you need, when you need it. Published 2026 terms:
- OnDeck: limits of $6,000 to $200,000, repaid over 12, 18 or 24 months, weekly or monthly, with "no origination fees, monthly fees or draw fees." OnDeck reports an average line of credit APR of 59.8% for lines originated in the half-year ending June 30, 2026 (OnDeck).
- Bluevine: lines "up to $250,000" with "rates as low as 7.8% for top qualifying customers," repaid by automatic weekly or monthly debits (Bluevine).
- American Express Business Line of Credit: line sizes limited to $250,000 on qualification, with terms of 6, 12, 18 or 24 months and "monthly loan fees" of 0.55% to 1.55% of principal instead of an interest rate (American Express).
For a side-by-side look at the two structures, see working capital loans vs lines of credit.
SBA 7(a) working capital
SBA 7(a) loans can be used for "short- and long-term working capital," up to $5 million (SBA). Working capital and inventory loans generally run 10 years or less, and SBA caps the rate a lender can charge on variable-rate loans (SBA terms):
| Loan amount | Maximum variable rate |
|---|---|
| $50,000 or less | Base rate + 6.5% |
| $50,001 to $250,000 | Base rate + 6.0% |
| $250,001 to $350,000 | Base rate + 4.5% |
| Over $350,000 | Base rate + 3.0% |
Two SBA programs are built specifically for working capital. The 7(a) Working Capital Pilot goes up to $5 million, requires 12 full months of operations, and runs up to 60 months, with lenders reviewing updated financials each year. CAPLines cover seasonal, contract, builders and general working capital needs, with maturities of up to 10 years (SBA types of 7(a) loans). For smaller amounts, SBA Express loans go up to $500,000 and can be structured as revolving lines of up to 10 years (same source).
SBA Microloans
Microloans go up to $50,000, and the average is about $13,000. They can pay for working capital, inventory, supplies, furniture, fixtures, machinery and equipment, but not existing debts or real estate. The maximum term is seven years, and SBA says rates are "generally, between 8%-13%," set by each intermediary lender (SBA).
Sales-based financing
Some providers size and collect the advance from your card sales. Square Loans, for instance, are offered by invitation, based on factors including "payment processing volume, account history, and payment frequency," and repaid as a percentage of daily card sales, with a minimum payment required under the loan terms (Square). Merchant cash advances work in a similar way and are often priced with a factor rate; our merchant cash advance guide and factor rate calculator show how to compare them with an APR.
What a working capital loan costs: a $50,000 example
Where you borrow matters far more than which structure you pick. A contractor needs $50,000 to cover payroll and materials while waiting on progress payments, and plans to repay over 12 months in equal monthly installments.
| Option | Rate assumed | Monthly payment | Total interest over 12 months |
|---|---|---|---|
| SBA 7(a) loan at the rate cap | 13.0% | About $4,466 | About $3,590 |
| Online term loan at OnDeck's reported average | 53.2% APR | About $5,462 | About $15,549 |
How the rates were chosen: the bank prime rate was 7.00% on November 5, 2026, according to the Federal Reserve's H.15 release. We assumed a lender that uses prime as the base rate and charges the full 6.0% maximum allowed on a 7(a) loan of $50,001 to $250,000, for 13.0%. The online figure is OnDeck's reported average term loan APR. Both use standard amortization and exclude fees.
The difference is about $11,960 on the same $50,000. The SBA loan also takes longer to arrange, so the real question is whether the speed is worth that gap for your situation.
Fees and pricing formats to check
- Origination fees. OnDeck says only customers who have previously renewed a term loan can get a 0% origination fee (OnDeck), so ask for the fee in dollars.
- Fee-based pricing. American Express quotes monthly fees instead of an interest rate. Ask any lender that prices this way for the APR and the total dollar cost.
- Prepayment. OnDeck borrowers who qualify for its 100% prepayment benefit can pay off early and have the remaining interest waived. Otherwise, OnDeck says, you owe 75% of the remaining unpaid interest (same source). Read your own agreement before counting on early payoff savings.
- Higher than expected costs. In the Fed's report, 60% of firms that borrowed from online lenders said their actual costs were higher than expected (2026 Report on Employer Firms, PDF). Get the total payback amount in writing before you sign.
Who qualifies
Published minimums are the floor, not a guarantee. Meeting them gets your application read; your cash flow and credit decide the amount and price. Minimums checked November 7, 2026:
| Lender and product | Personal credit score | Time in business | Revenue | Other |
|---|---|---|---|---|
| OnDeck term loan or line | 625 FICO | 1 year | $100,000 a year | Business checking account |
| Bluevine line of credit | 625+ FICO | 12+ months | $10,000 a month | Corporation or LLC |
| American Express Business Line of Credit | 660 FICO | 1 year | $3,000 average monthly | Score may need to be higher |
| SBA 7(a) Working Capital Pilot | Set by lender | 12 full months of operations | Set by lender | Annual financial review |
| SBA Microloan | Set by intermediary | Set by intermediary | Set by intermediary | Up to $50,000 |
Sources: OnDeck, Bluevine, American Express, SBA, SBA Microloans.
For SBA 7(a) loans generally, SBA's standard is that loans "must be sound with a reasonable assurance of repayment ability," and lenders may weigh credit history alongside cash flow, equity and collateral (SBA terms).
Approval odds depend on the product and the lender. In the Fed's 2026 report, 45% of line of credit applicants were fully approved, against 35% of business loan applicants. Small banks had the highest full approval rate of the lender types reported, at 57%.
Below these credit floors? See our guide to a line of credit with bad credit, or check your options with Loanistry to see which lenders' minimums you meet.
For every lender's published floor side by side, see business line of credit requirements by lender type.
How to get a working capital loan, step by step
- Size the gap. List the bills due before the money comes back, and by when. Borrowing more than the gap only adds cost. Our guide to how much of a business loan you can get shows the math lenders use.
- Decide how fast you need it. If you have weeks, start with your bank, a credit union or an SBA lender. If you have days, online lenders are the realistic option, at a higher cost.
- Match the structure to the need. A one-time need with a clear payback date fits a term loan. A recurring or uneven gap fits a line of credit.
- Gather documents. Expect recent business bank statements, a recent tax return, and basic ownership and business information. SBA lenders typically ask for more, including financial statements.
- Compare offers on the same basis. Ask each lender for the APR, the total payback in dollars, the payment frequency and the prepayment terms.
- Check the payment against your cash flow. Daily or weekly payments start quickly. Make sure your account can cover them in your slowest weeks.
- Read the guarantee and lien terms. Most of these products require a personal guarantee, and many lenders file a public lien on business assets that future lenders will see.
When a working capital loan makes sense, and when it does not
Good uses have a clear payback: a seasonal stock-up that sells through, a large contract that pays in 60 days, a short dip you can see the end of.
Poor uses are covering a loss that will keep happening. If the business spends more than it earns every month, a loan only delays the problem and adds a payment. Fix pricing, costs or collections first.
Pro tip: Apply for a line of credit before you need it. Your numbers look better to a lender before a cash crunch than in the middle of one.
Alternatives to a working capital loan
- Business credit cards for small, short gaps, especially with an introductory 0% APR. See our 0% APR business credit cards list.
- Invoice factoring if slow-paying customers are the cause. The cash comes from your receivables rather than a new loan.
- Supplier terms. Asking a key supplier for 30 or 60 days can close the gap at no cost.
- Faster collections. Deposits, shorter invoice terms and electronic payments bring cash in sooner.
Sources
- Federal Reserve Banks: 2026 Report on Employer Firms (summary page), checked November 7, 2026
- Federal Reserve Banks: 2026 Report on Employer Firms (PDF), checked November 7, 2026
- Federal Reserve Board: H.15 Selected Interest Rates, checked November 7, 2026
- SBA: 7(a) loans, checked November 7, 2026
- SBA: Types of 7(a) loans, checked November 7, 2026
- SBA: Terms, conditions, and eligibility, checked November 7, 2026
- SBA: Microloans, checked November 7, 2026
- OnDeck: Business term loans, checked November 7, 2026
- OnDeck: Business line of credit, checked November 7, 2026
- Bluevine: Business line of credit, checked November 7, 2026
- American Express: Business Line of Credit, checked November 7, 2026
- Square: Apply for a loan, checked November 7, 2026