Best Working Capital Loans for 2020

As a business owner, it can feel like you have the weight of the world on your shoulders, but a working capital loan can help you find extra funding when your company needs a helping hand. A working capital loan is a different kind of small business loan that is specifically used to give your daily operations some extra financial help.

A working capital loan can be exactly what you need to take your business to the next level, from payroll support and supplies to emergency repairs and advertising campaigns.

These are our picks for the best working capital loans for 2020.

The 5 best working capital loans of 2020

The best working capital loans at a glance

APR Loan Amount Terms Minimum Credit Score
Kabbage 1.25%–10% $2,000–$250,000 6, 12 or 18 months 560
Fundation 7.99%–29.99% $20,000–$500,000 12–48 months 620
StreetShares 7%–39% $2,000–$250,000 3–36 months 600
Accion 7%–34% $300–$1M Up to 25 years 575
PayPal Working Capital 10%–30% of daily business sales plus flat fee Up to 30% of sales or up to $125,000 Daily repayment N/A

Rates accurate as of July 22, 2020.

Best for bad credit

Kabbage

Kabbage is a great choice if you have poor credit but watch out for high repayment fees.

APR
32%–108%
Loan Amount
$2K–$250K
Terms
6, 12 or 18 months
SimpleScore
2.8 / 5.0
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SimpleScore
Kabbage
2.8
  • APR
    1
  • Loan Size
    3
  • Product Variety
    2
  • Resources
    5
  • Fees
    3
When you are in need of a business loan, your credit may not be the best. Kabbage could be a great solution for you. It also considers your revenue and shipping information to offer a working capital loan with terms that actually work for you. It offers some of the lowest APRs available with reasonable loan amounts. However, repayment terms are limited to a maximum of 18 months, so you won’t find the extended terms that other companies offer.
Full review

Our Two Cents — With an online application and fast funding, Kabbage could be the quick working capital loan that you need for your business.

Best for small- and medium-sized businesses

Fundation

If you’ve been in business for more than two years, Fundation can give you a quick financial boost to keep going.

APR
7.99%–29.99%
Loan Amount
$300 –$1M
Terms
Up to 25 years
SimpleScore
3.2 / 5.0
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SimpleScore
Fundation
3.2
  • APR
    3
  • Loan Size
    4
  • Product Variety
    2
  • Resources
    4
  • Fees
    3
Fundation specially works with small-to-medium-sized businesses. While it is not the lender for new companies, if you have an already established business in need of quick funds, this could be great for you. You will need at least three employees and annual sales over $100,000 to qualify. The rates are on par with industry averages, but Fundation grants loans up $500,000. This is double what other lenders like Kabbage and StreetShares offer. There are also reasonable repayment terms that allow up to 48 months for repayment.
Full review

Our Two Cents — Fundation is a good option for small- and medium-sized businesses to lay the foundation to turn your business into a large-scale company.

Best for veterans

StreetShares

StreetShares offers newer business owners the chance for extra capital with special consideration for military members.

APR for unsecured term loan
7%–39%
Loan Amount
$2K–$250K
Terms
3 – 36 months
SimpleScore
3.8 / 5.0
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SimpleScore
StreetShares
3.8
  • APR
    3
  • Loan Size
    3
  • Product Variety
    5
  • Resources
    5
  • Fees
    3
Based just outside of D.C., StreetShares has a special focus on veteran-owned businesses. Requirements are very reasonable; you only need to be in business for one year with only $10,000 in annual revenue. There is a convenient online application, and funding can be received in as little as 24 to 48 hours. Interest rates are higher than most other lenders, reaching as high as 39% in some cases. Loans are also limited to $250,000, and you will have up to 36 months for your repayment term.
Full review

Our Two Cents — A military-first focus and flexible loan amounts make Street Shares a great pick if you have a newer business. After all, it’s important to share the wealth.

Best for new businesses

Accion

Accion offers the largest working capital loans for startups to get the engine going.

APR
7%–34%
Loan Amount
$300–$1M
Terms
Up to 25 years
SimpleScore
3 / 5.0
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SimpleScore
Accion
3
  • APR
    2
  • Loan Size
    4
  • Product Variety
    1
  • Resources
    5
  • Fees
    3
Accion is a lender specially dedicated to startups and newer businesses who need a cash infusion. Loans are available up to $1 million, by far the largest of any lender on our list, although your state may dictate your exact loan limits. What is really notable is the extensive repayment term of up to 25 years. The interest rates cover about the average range for a working capital loan and really run the gamut, so your credit score and business details will determine where you fall on such a wide range of rates.
Full review

Our Two Cents — Accion is a champion for new businesses and startups, whether you need to expand your portfolio or hire new employees to keep growing.

Best for online sales

PayPal Working Capital

PayPal offers a uniquely designed lending solution for your online business.

APR
None
Loan Amount
18% of sales
Terms
Daily
SimpleScore
3.6 / 5.0
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SimpleScore
PayPal Working Capital
3.6
  • APR
    N/A
  • Loan Size
    N/A
  • Product Variety
    2
  • Resources
    5
  • Fees
    4
PayPal knows a thing or two about online business, so it makes sense that it would provide business capital, as well. With PayPal Working Capital, you basically borrow against your own sales. PayPal fronts you the capital upfront, and then you repay the loan with up to 30% of your daily sales. We also appreciate that PayPal caps this amount by adding a maximum of $125,000, so you don’t have to worry about high penalties if you have an incredible month of sales. To minimize your loan fees, you can elect to pay a higher percentage of your daily sales.
Full review

Our Two Cents — PayPal offers a new kind of loan structure that is based on your sales, and as the frontrunner of online sales, it makes sense for businesses who use the service already.

What is a working capital loan?

There are times when a business needs extra cash. Sales could be down, or your equity could be tied up in assets. Either way, a working capital loan can get you the cash you need quickly. These funds are designed to cover your daily expenses, like payroll, supplies and utilities. This is a different loan from the one you would use to purchase equipment or real estate because this is cash to keep your business operating.

Working capital loans are generally smaller than other kinds of business loans, so they can also hold shorter terms and sometimes higher rates. Repayment can vary significantly, from terms that stretch over several years to daily payments that use a percentage of your daily sales.

How should I choose the right working capital loan?

When you look for a working capital loan for your business, there’s more to consider than just the amount that you need. Carefully consider your ability to repay the loan. Is it better to take a smaller loan that can be paid off quickly, or do you need an extended repayment term that gives you more time to grow your sales? There are also companies like PayPal that allow you to repay your loan through your daily sales.

The eligibility requirements and application process are important, as well. Many companies, such as our picks here, allow for online applications and fast turnaround for funding.

[Read: Small Businesses Can Apply For PPP Loans Again Thanks to a Second Round of Funding]

When to use a working capital loan

There are many reasons why your business may need a working capital loan. You may have fallen behind on your bills or need extra supplies for an upcoming busy season. The loan can help you make payroll next month or float your seasonal business during a quiet off-season. Another popular use for a working capital loan is for marketing or advertising that can raise your exposure and boost your sales. There may also be times when you need to take emergency precautions or deal with unexpected expenses that can affect your sales.

The beauty of a working capital loan is that it is available in smaller amounts, so you won’t have to mortgage the house in order to keep your business afloat.

How to apply for a working capital loan

  1. Determine how much you need. While there are many lenders who offer working capital loans, not all of them will offer the kind of terms that you need. Consider not only how much you need but how much you will be able to pay back, because interest will cause your total loan to exceed the actual borrowed amount.
  2. Be prepared. Before you apply, check your credit score to see where you stand. Your credit score and annual sales will be key determinants in whether you are approved for your loan, so gather all of the documents you will need. This includes everything from your credit report and bank statements to balance statements and tax returns. It is a lot of information that lenders will certainly require.
  3. Shop your options carefully. There are so many options out there for a working capital loan, but they will not all fit the distinct needs of your business. When you are looking for a lender, the loan terms and amounts will determine whether each company will work for you. Consider the eligibility requirements, as well as the application process and turnaround time for funding. Every bank has different requirements for how much you can qualify for and how long you will pay it back.
  4. Start the application process. Some companies allow you to apply online while others require you to apply over the phone or in-person at a branch. Many of our picks for the best working capital loans have fast, easy applications that can be completed entirely online, saving you countless hours and travel. You can also receive all of your documents and forms online for easy, secure processing that gets you your funding that much faster.

Too long, didn’t read?

A working capital loan can be an invaluable lifeline for your business, but if you are not careful, it can deeply harm your business. It’s important to remember that no matter how much you borrow, you will be responsible for paying it back with interest, and that interest will only continue to accumulate over time.

Keep reading

Methodology

The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For working capital loans loans, we compared interest rates, product variety, loan amounts, resources and fees for every major lender. Our ratings are meant to be a directional tool to help you in the process of choosing a working capital loan provider. Be sure to continue your research and shop around for the best working capital loan that fits your specific needs.

We welcome your feedback on this article and would love to hear about your experience with the business loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

Lena Borrelli
Lena Borrelli
Contributing Writer

Lena Borrelli is a Tampa-based freelance writer who has worked with leading industry titans, such as Morgan Stanley, Wells Fargo, and Simon Corporation. Her work has most recently been published on sites like TIME, ADT, Fiscal Tiger, Bankrate and Home Advisor, as well as many other websites and blogs around the world.

Reviewed by

  • Courtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.