Working Capital Loans: What Are They and How Do They Work? Working Capital Loans
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Working Capital Loans: What Are They and How Do They Work?


There’s nothing more stressful for a business owner than not having enough cash to cover working expenses or other operational costs. Working capital loans are the perfect solution to the slow rigorous bureaucracy we call banks.


Most business owners find themselves in need of extra cash at some point in the company’s lifetime. Slow sales, new competition, a seasonal business model, unforeseen circumstances and unexpected opportunities are all factors which can cause cash flow problems.


Fortunately, there are working capital loans – just the thing your business needs when you’re in need of an immediate injection of capital. 


Whether you are having trouble paying your operating expenses, have an equipment breakdown or just a slow month, working capital loans are at your disposal (usually with just a click of a few buttons).


Working capital loans give you the ability to pay those working expenses and continue daily operations while generating the revenue necessary to run your business smoothly without sweating a temporary crunch. 

With the evolution of Fin-Tech, you’re not limited to a single type of business loan product. Excel now offers a variety of options all catered to your specific business needs.


What are working capital Loans used for?


The great thing about acquiring working capital for your business, whether it’s your first time or you’ve done it before, is that is can be used for almost anything as long as it pertains to the business.

A good rule of thumb when deciding whether you need a working capital loan is understanding the Net Working Capital Formula.  This formula allows you to quickly calculate the “plus” or “minus” between a business’s current assets and liabilities.

If you find that you are in the negative it might be a good idea to see what options are available to help cover any upcoming expenses that might be coming due.

No matter what industry you operate in, a quick injection of capital into your business can help with cash flow issues, expenses, equipment repairs, inventory purchases, and more.


Let’s take a closer look at a few popular items working capital is used for:


Business expenses


In general most of our applications for working capital loans are for business expenses. Whether it be an advance to cover upcoming payroll or a business loan to pay the rent. The variety of needs for quick business loans are almost infinite.


By acquiring working capital for your business, you’ll be able to pay for things that may not have been affordable in the past. This includes office supplies, new software, marketing or even open bills and credit card debt.


New hires and employee training


If your business is taking off, funding for additional hires or employee training might be just what you need. Maybe you need to hire additional cashiers for your store, wait staff or hosts for your restaurant, or more receptionists for your medical office. On top of this, these new or current employees may need additional training. Working capital can be used for all of these this and more.


Inventory and equipment purchases


Many business owners choose to use working capital to take advantage of bulk pricing on inventory and equipment. Similarly, equipment such as machines, computers, vehicles, and more can reach well into the thousands of dollars. Because many vendors require a large upfront payment for this type of pricing on inventory and equipment, working capital gives business owners the funds they need to purchase the items they need before it’s too late.


Most vendors do not accept credit cards and most business credit cards do not have high enough limits to pay for such large ticket items. 


Working Capital Loans are wired to your account and give you the ability to use the cash to buy what you need.


Unforeseen challenges


Every business runs into their fair share of challenges from time to time. Equipment fails, vehicles breakdown, natural disasters occur, and employees leave without notice. These and other headaches are unforeseeable and can be costly, but working capital can help to cover these costs in a matter of few days so your business doesn’t have to miss a beat.


Marketing & advertising


Website development, paid ads, and social media marketing is a big job, and hiring a team of professionals can be pricey, but they’re the major force getting your product or service in front of more eyeballs. Having enough working capital to cover these expenses can help tremendously.


Research & development


Development of your products and services is essential for staying ahead in your industry. Additionally, performing the proper market research and analyzing your target audience and consumer behavior is key to knowing what your customers want. Working capital can be used to fund these critical efforts as well.


Product manufacturing


Similar to research and development, product manufacturing is a constant need for manufacturing-related businesses.


Working capital is critical for such businesses, especially during slow periods or when demand is so great that it becomes difficult to meet it with an equivalent supply.


Office space & business locations


If your business needs office space or a facility to properly operate, working capital can be used to acquire that space during the startup phase.


Clearly, working capital is critical to the operation of any business and a working capital loan can help you pay for any and all of these expenses and investments.


But is a working capital loan right for your business? And what are your options?


Is a working capital loan right for my business?


A working capital loan allows you to maximize the growth of your business when working capital is low. This allows you to avoid unforeseen setbacks and pump funds into projects specifically to expand your business.


Also, most working capital loans are great because they don’t require collateral. That means you can get the funding your business needs without the risk of losing valuable assets your business needs to operate.


If you’re a small business, a new startup, or are simply low on cash due to various circumstances, a working capital loan may be just the thing your business needs.


Working capital loan options


Most small business loans for working capital are too difficult to obtain for the average small business or startup. That’s because they require guarantees or collateral to ensure the loan will be repaid. This makes them a far less viable funding option.


In recent years, these guarantees have become increasingly more difficult to meet, with traditional lenders requiring higher value collateral for acceptance.


But don’t fret because there are several great alternative lending options your small business or startup can take advantage of to get the working capital you need.


Let’s take a look at some of the most common working capital loans:


Business Lines of Credit


Business Lines of credit are our clients favorite type of funding options for working capital. Even though they are technically not loans they do give you the ability to receive a quick infusion of capital with a click of a button.


This product is geared towards businesses that want the ability to repay business funding at their pace with a fixed amount due per each month of usage.  


A business line of credit is available to business owners with the following criteria:

  • At least 1 year of age
  • have at least $50,000 a year in gross revenue
  • Have a minimum credit score of 540
  • Have close to no overdrafts or returned items in the last 90 days.
  • This is not available to Non-profits.
  • Must have a business bank account


This line of credit is automatically ACH’d out of a business bank account on a monthly basis and you as a business owner have the ability to pay early or make extra payments to reduce your cost. This works very similarly to a credit card but you get cash.


Get a business line of credit from Excel Capital


Merchant Cash Advance / Split funding


Merchant Cash Advances, also known as Split Funding, work on a ‘pay as you earn’ model. That means a flat percentage of your business’ credit and debit sales are automatically debited to repay the loan.


If your business does a large number of credit card sales one day, an equivalent larger payment is taken out to pay back the advance. If a small amount of sales is done that particular day, you pay less. The percentage is always the same and, because it comes from the sales you’ve generated, you’re able to pay it back at a pace that best fits your business.


For that reason, there is no fixed payment amount or maturity date. Keep in mind that because of the nature of the loan, it’s available only to businesses that accept and generate regular credit card payments.


How to qualify for a merchant cash advance:


  • 2 or more months of operating history
  • Monthly recurring credit card sales of $7,500 or more
  • Gross monthly sales of $10,000 or more


Get a merchant cash advance from Excel Capital


Unsecured business loans


Unsecured Business Loans are popular because they don’t require collateral. As a result, your business can receive the working capital you need without the fear of losing precious assets in the event that you can’t repay the loan.


However, keep in mind that unsecured business loans often have strict guidelines because the lender takes on most of the risk.


How to qualify for an Unsecured Business Loan:


  • 4 months of business bank statements


Get an unsecured business loan from Excel Capital


Short-term working capital loans


A Short-Term Working Capital Loan is typically used to fill an immediate financial need and fix cash flow issues.


Short-term working capital loans are great because most lenders that provide this type of loan don’t require tons of paperwork. In addition, they can be used for virtually any purpose.


Common uses for short-term working capital loans are:


  • Inventory purchases
  • New hires and employee training
  • Equipment repairs
  • And filling gaps between accounts payable and receivable


Short-term working capital loans have a shorter repayment schedule with higher costs and are paid back via weekly ACH payments.


In contrast, traditional term loans are paid back within a fixed term and at a set interest rate.


And while traditional term loans allow you to build business credit and have fixed monthly payments, they come with less flexible terms and rates and penalties may be charged if the loan is paid off early.


How to qualify for a Short-Term Working Capital Loan


  • 4 months of most recent bank statements
  • Minimum of 3 months in business
  • Minimum of $7,500 in monthly revenue
  • Less than 9 Negative in the last 2 Months
  • 6 months in business 


Get a short-term business loan from Excel Capital


Get the funds your business needs with working capital loans


Working capital is critical to the growth of your business. No matter which of the above options is the best fit for your business, take advantage of the funding power and flexibility of working capital loans for your small business.


To learn more about working capital loans for small businesses and to find out what you qualify for, click here to apply and see how we can help you and your business.

Most business owners need working capital to fund operations. Banks generally take too long. 

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