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Best Working Capital Loans for 2021
These are our picks for the best working capital loans for 2020.
The 5 best working capital loans of 2021
- Best for Bad Credit: Kabbage
- Best for Small- and Medium-Sized Businesses: Fundation
- Best for Veterans: StreetShares
- Best for Startups: Accion
- Best for Online Businesses: PayPal Working Capital
The best working capital loans at a glance
|APR||Loan Amount||Terms||Minimum Credit Score|
|Kabbage||Varies||$2,000–$250,000||6, 12 or 18 months||560|
|Accion||7%–34%||$300–$1M||Up to 25 years||575|
|PayPal Working Capital||Varies||Based on Paypal account||Varies||N/A|
Best for small- and medium-sized businesses – Fundation
Fundation is a good option for small- and medium-sized businesses to lay the foundation to turn your business into a large-scale company.
Fundation especially 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 of over $100,000 to qualify. The rates are on par with industry averages, but Fundation grants loans up to $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.
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.
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
- 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.
- 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.
- 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.
- 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.
We welcome your feedback on this article and would love to hear about your experience with the business loans we recommend. Contact us at firstname.lastname@example.org with comments or questions.