News and advice for small business owners, by small business owners.

Call us for free financing advice:

1 (800) Fundera 386‐3372

Finding Small Business Working Capital

Positive working capital is critical to the operations of a small businesses. If a company has little or no working capital, it won’t be in operation for long as it won’t be able to fund ongoing operations of the business. Most companies have periods where they don’t have cash on hand, especially companies that are seasonal in nature or just starting out and figuring out their operational cycles. So how can a company raise small business working capital during these periods?

Here are five common ways  to find small business working capital – read up to see what might be a fit for you.

Merchant Cash Advances

A merchant cash advance is a short-term financing option that is repaid as a daily percentage of credit card sales. Small businesses that have a high volume of transactions are the ideal candidates for this type of loan. Since the loan is repaid as a percentage of sales, if your sales are unusually low, the payment amount drops accordingly. This can be a more attractive, flexible option for a business owner as compared to a fixed payment loan, which requires your business to make the same payment every month no matter what business is like.

Working Capital Loans

Another way to raise small business working capital is through a working capital loan. A working capital loan is a loan specifically for short-term cash flow needs. Many different loan terms and payment options are available. Usually, good credit and collateral are needed to be approved for this type of loan, but some lenders will take into account other evidence that you can repay the loan.

Working Capital Line of Credit

Suppose your business is seasonal in nature, but you don’t know exactly how much money you might need to borrow or even if you’ll need to borrow at all? You can apply for a working capital line of credit which gives you access to the funds you might need, but doesn’t charge any interest or fees until it is actually used.

SBA Loan

A Small Business Administration loan is a bank loan for small businesses made through traditional commercial banking institutions but backed by a government guarantee. The SBA guarantees a portion of these loans, which in turn makes banks more likely to provide financing for needs such as small business working capital. Collateral and credit are required, and the process can be lengthy, but interest rates and terms can be more favorable.

Invoice Factoring

If your business has trouble qualifying for other types of financing options, accounts receivable factoring is another tool to raise money for small business working capital purposes. Most businesses that issue invoices don’t get paid right away, as they provide customers a window of 30-90 days to make payment. This in turn delays access to cash, which can be critical to ongoing operations such as making payroll, buying inventory, or meeting other expenses. Invoice factoring is essentially selling your invoices to a financing firm that then collects the payments from your customers, in exchange for a fee. They usually pay about half of the face value of an invoice upfront, and pay you the remainder once the customer has submitted payment.

Access to small business working capital financing is essential for your business to grow and expand. Knowing all of your options will allow you to compare the fees, collateral, and credit requirements of different loans and ensure your company succeeds.


Meredith Wood

Meredith Wood

Editor-in-Chief at Fundera
Meredith is Editor-in-Chief at Fundera. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.
Meredith Wood