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With a myriad of options available, it's crucial to understand the different types of loans and how they can benefit your business. In this guide, we'll explore the best small business working capital loans, compare rates and terms, and help you find the best fit for your needs.
Understanding Working Capital Loans
Working capital loans are designed to cover the short-term operational needs of a business. These needs can include payroll, rent, inventory purchases, or any other expenses that keep the business running smoothly. By securing a working capital loan, you can ensure your business remains operational during slow periods or while waiting for receivables to be paid.
Types of Working Capital Loans
Business Working Capital Line Of Credit
A business working capital line of credit provides flexible access to funds up to a predetermined limit. This type of loan is ideal for businesses with fluctuating cash flow, as you can draw on the line of credit as needed and only pay interest on the amount borrowed. Once you repay the borrowed amount, the credit becomes available again, much like a credit card.
Short-Term Loans
Short-term loans are lump-sum loans that are repaid over a fixed period, usually within one year. These loans are suitable for businesses that need a quick influx of cash and have a clear plan for repayment. They often come with higher interest rates compared to long-term loans but provide fast access to funds.
Invoice Financing
Invoice financing allows businesses to borrow against their outstanding invoices. This type of loan is beneficial for businesses that experience delays in payments from customers. The lender advances a percentage of the invoice amount, and you repay the loan once the customer pays the invoice.
Best Small Business Working Capital Loans
To help you find the best working capital loans, we’ve compared some of the top options available:
| Loan Provider | Type | Interest Rate Range | Loan Amount | Term Length | Highlights |
|---|---|---|---|---|---|
| Kabbage | Business Line of Credit | 9% - 36% | $2,000 - $250,000 | 6, 12, or 18 months | Fast application process, flexible terms |
| OnDeck | Short-Term Loan | 9% - 99% | $5,000 - $250,000 | 3 - 24 months | Quick funding, rewards for repeat customers |
| Fundbox | Invoice Financing | 4.66% - 13.44% | Up to $150,000 | 12 or 24 weeks | No minimum credit score, easy integration with apps |
| BlueVine | Business Line of Credit | 4.8% - 51% | $5,000 - $250,000 | 6 or 12 months | High credit limits, fast approval process |
| Fundera | Multiple Loan Types | Varies | $2,500 - $500,000 | 3 months - 5 years | Personalized loan matching, multiple loan options |
