Top 6 fast working capital loans for small businesses

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May 2022

If you have a small business, you know that profits for your business are not immediately. Not having enough profits can make day-to-day expenses hard to keep up. With a fast working capital loan, you can get the boost you need to pay necessary bills without losing a percentage of your own company.

Compare options from online funders to find the best way to cover some of your expenses and expand your operations. We have provided you with our top six fast working capital loans below. But first, we will learn what a working capital loan is and how it can benefit a small business. 

What is a working capital loan?

Working capital loans are short-term financing used to pay for regular business expenses, including rent, wages, utilities, and inventory purchases. Working capital loans are unsuitable for long-term expenditures but can help businesses manage operational costs and stable cash flow. Merchant cash advances, lines of credit, SBA loans, and invoice factoring are a few ways companies can obtain working capital loans.

How can working capital benefit your operations?

This type of financing helps a business in the short term; for example, it can help you grow your daily assets and have access to cash when you need it the most. You can use working capital for several reasons, some of them including the following:

  • To hire more staff.

  • To make sure payroll is covered.

  • To cover the costs for maintenance or repairs.

  • To add new inventory to your sock.

  • To maintain operations when your business is on a low economic season.

Working capital loans can also assist business owners in filling funding gaps, compensating for seasonal fluctuations in revenue, and covering payroll costs, among other business expenses.

How much working capital do you need?

The size of your working capital line of credit may depend on various things, such as type of business, operating cycle, and a company's growth goals. But, as a general rule, it shouldn't exceed 10% of your company's revenue. To understand how much current working capital your business has, you can apply the working capital calculation:

Working Capital= Current Assets - Current Liabilities.

For example, if your company balance sheet has 500,000 total current assets and 300,000 total current liabilities, your working capital is 200,000 (assets - liabilities)

Current assets include cash, accounts receivable, marketable securities, and other liquid assets. Current liabilities are the financial obligations you have due within one year, such as income taxes, short-term debt, and accounts payable.

Types of fast working capital for small businesses

Now it is time to dig into some of the most common working capital loans for small businesses that can help a company get through a short-term cash need.

1. Online funders

You can now find expedited access to fast funding for small businesses online, more than ever before. Online funders are your most immediate funding source, and once you accept an offer, you can receive funds within two business days or less. You can expect a simplified loan application process by picking the right funder. Some offer more flexible credit history requirements than those imposed by big banks.

A way to ensure your funder is a good one is by checking reviews and scores of the company at Better Business Bureau, also making sure they have an address in the U.S.

So, if you have a small business looking for alternative funders, you can check if you pre-qualify for One Park Financial working capital programs. You can access a network of more than 30 funders and funding experts through One Park Financial, who will help you quickly sort through your business funding options. See how it works.

2. Peer-to-peer

You can try peer-to-peer funding if you have a solid credit history of 700 or above. These platforms connect small business owners with funders - such as individual investors, hedge fund managers, or investment banks. Also, it's important to mention that while most of these platforms deliver funding faster than traditional banks, you should check the FAQs and terms before sealing the deal. The speed of an individual offer will depend on where the working capital originates. For example, if it's a significant investment bank, it's unlikely that you'll see fast cash availability.

3. Micro-funders

Like peer-to-peer, this method's speed depends on who is offering the loan. These loans are for up to $50,000. Many microloans can be community-based organizations, non-profits, individual investors, or companies (ranging in size from small to big corporations).

These loans may offer free consulting to small business owners, often from retired business executives or financial consultants. Micro funders may not be the best option for business owners who need super-fast access to funds, but they are typically very affordable.

4. Personal loans

Personal loans are lump-sum loans that must be repaid in fixed monthly payments over months or years. They are typically unsecured, which means they do not require collateral, though secured personal loans are available. Borrowing a personal loan to cover business expenses puts your credit at risk if you fail to repay the loan.

Personal loans are typically easier to obtain, but they may be less cost-effective for seasoned business owners. Both personal and business loans have advantages and disadvantages, so weigh your options and learn about alternatives before borrowing money for your company.

5. Invoice factoring

It is not uncommon for business owners to wait 30-90 days for invoice payment. Those unpaid invoices can cause significant cash flow problems when business is slow.

With factoring, the funder gives the borrower a portion of the amount due on invoices. The funder then collects the full invoice amount, plus fees and interest. With invoice discounting, the funder loans the business owner a percentage of the invoice. Still, the business owner is responsible for collecting the payment and paying back the loan along with fees and interest.

Learn more about, What is invoice factoring and how does it work?

6. Merchant cash advances (MCA)

Merchant cash advances are an excellent option for a small business owner who needs a fast infusion of funds. Merchant cash advances are typically easy to qualify for since you don't need a perfect credit history. Usually, all you need is a business bank account.

An MCA is an advance on money you will earn in the future. Once received, you pay back the advance via a set percentage of the daily or weekly revenues. Small businesses that see daily transactions, such as restaurants or stores, can provide an easy way to access funds quickly. The funders will look at a company and its receipts to determine whether to approve the advance, so small business owners with low credit ratings can often get approved for a merchant cash advance.

How to get working capital for your small business?

Getting a hold of funding that will aid your daily operations has never been easier. With One Park Financial, you can pre-qualify in just three minutes! All you need to show is that your business has been running for at least three months and earning at least $7,500 in gross monthly revenue.

Ready to get started? Please fill out our form, and one of our funding experts will find the best option for you and your business!

Disclaimer: The content of this post has been prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. Consult with your tax, legal, and accounting advisor before engaging in any transaction.