Having enough working capital is key to every successful business. Working capital — the cash available to cover day-to-day expenses — gives businesses the bandwidth to fulfill their regular financial obligations as well as flexibility to invest in growth.
But many businesses — even successful ones — struggle with having enough working capital at any given time.
Ideally, you’d establish a line of credit with your local bank before you experience a cash-flow crunch, because banks offer the lowest financing rates. But if you don’t have a bank line of credit and need working capital fast, several online products are available at a higher cost.
Here we compare eight working capital loans and break down when you should use each, the price you’ll pay to borrow and what you need to qualify.
Best working capital loan for businesses with short-term inventory needs
The lack of effective inventory management is a primary reason businesses have lapses in available cash, says Will Katz, director of the Small Business Development Center at the University of Kansas. If you need to purchase a lot of inventory upfront that you won’t sell and profit from until weeks or months later, inventory financing is one solution.
Online lender Dealstruck offers a line of credit designed exclusively for buying inventory. Our step-by-step guide will help you through the application process. Once you qualify for a loan from Dealstruck, you’ll need to submit your inventory purchase order. Dealstruck will pay your supplier directly, and you’ll start repaying Dealstruck after you begin selling that inventory.
|APR||11% to 22% plus the prime rate|
|Minimum qualifications||One year in business, $12, 500 in annual revenue, 600 credit score, inventory purchase order.|
|Apply via lender’s secure sites|
|7% – 8%||8% – 33%||8% – 30%||8% – 32%||11% – 28%|
|Two years in business, $50, 000 in annual revenue, 600 credit score*.||Two years in business, $150, 000 in annual revenue, 620 credit score.||Two years in business, $100, 000 in annual revenue, 600 credit score.||Two years in business, $75, 000 in annual revenue, 600 credit score.||One year in business, $12, 500 in monthly revenue, 600 credit score, inventory purchase order.|
|Apply via lenders’ secure sites||Learn More
(Read our Lending Club review and learn about the application process.)
(Read our Dealstruck review and learn about the application process.)
*SmartBiz doesn’t technically have revenue or credit score minimums, but most borrowers meet these minimum qualifications.
SmartBiz: This online lender offers loans guaranteed by the U.S. Small Business Administration, but the approval time for SmartBiz loans is much faster than it is for traditional SBA loans. SmartBiz is among the least expensive financing options out there. You’re most likely to qualify if you are an established business and have strong finances.
Funding Circle: Your business needs to have been profitable in at least one of the last two years to qualify for a loan.
Fundation: You need to have at least three employees (including yourself) to qualify.
Lending Club: Lending Club’s terms and APRs are very similar to those of online lenders Funding Circle and Fundation. If you qualify for all three lenders, apply for all and choose the one with the best APR. Complete all three applications within a short period of time so it’s only counted as one hard inquiry on your credit report.
Dealstruck: In addition to offering an inventory line of credit and an asset-backed line of credit, Dealstruck offers a term loan. Many business owners who use Dealstruck borrow both a line of credit (to cover recurring purchases) and a term loan (to pay for large, one-time business investments).
Working capital loans: the bottom line
Working capital is an essential component of running a business. If you don’t have enough of it, you can use several online small-business loans to augment your working capital, including lines of credit, short-term loans and term loans. Compare all your options based on factors including APR and what you qualify for before you apply.
Find and compare small-business loans
NerdWallet has come up with a list of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged the lenders by categories that include your revenue and how long you’ve been in business.
This post was updated. It was originally published on Aug. 25, 2015.
bankmecu, formerly the Members and Education Credit Union (mecu), is an Australian financial co-operative based in Kew, Victoria. In 2011, bankmecu reported that the organisation has approximately 135,000 customers across Australia. The organisation employs 348 staff across Australia and holds assets in excess of A$2.6 billion.
On 1 September...
The University of Northampton is a university in Northampton, Northamptonshire, England.
In 1924, Northampton Technical College was opened at St George's Avenue, site of the current Avenue Campus. A new building for the college was formally opened by the then Duke and Duchess of York in 1932. A School of Art opened later in 1937.
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