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Working Capital Loans


A working capital loan is a funding method to help a business with the day-to-day running of the company. In essence, working capital loans are a cash flow loan that, rather than being used to help expand the business or invest in opportunities, are required to cover expenses such as rent, wages and general utilities.

Who are they for?

As cash flow can be a problem for large and small businesses alike, working capital loans can be utilised by both SME and vast corporations that require a short term solution. However, as larger entities have a number of funding solutions available to them, working capital loans tend to be used by smaller businesses who are unable to access bank loans and other methods of funding.

working capital loans

Eligibility will depend on a number of issues as there are many types of working capital loans available. Invoice financing, for example, can be accessed by established businesses with outstanding invoices owed to them. By selling the value of the invoice to the factor, they are able to access funds that would otherwise take time to clear. The factor, however, will require a minimum annual or monthly turnover, which can make it unsuitable for start ups. The terms and conditions of invoice financing are different for working capital funding so talking to the provider is recommended.

Another popular method is the business overdraft, which can be beneficial in the medium as well as short term. As interest is only charged when the overdraft is used, this can make it the more cost-efficient method of funding. What’s more, an overdraft can be set at vastly different values, meaning smaller businesses can construct small levels of borrowing that may be able to provide both peace of mind and a safety net.

Pros and Cons

The advantages to a working capital loan are inherent in its workings. By freeing up cash flow a business can traverse difficult months, avoid late payment fines and pay their workforce during these periods of uncertainty. What’s more, because these funding methods need not be constructed in the traditional loan way, it may be possible to avoid the higher bran interest rates.

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Small businesses in particular may have fewer options available to them when it comes to funding. For the funding provider, the risks, coupled with the often limited profit, means the loan often makes little sense. Working capital loans are constructed in a way that reduces the risk to the service provider or lender while still providing vital funding for the business.

The biggest disadvantage depends on the type of loan accessed. Some loans, for example, may only be accessed by providing property or other assets as liability for the loan. This means if the terms of the funding are not met, the lender may repossess said assets, leading to the loss of homes and vital infrastructure to the business.

As with any funding method, it is therefore vital that you fully understand the terms and conditions of the loan before committing to the contract.


As the term working capital loan covers many types of funding, the range of providers and their services is also highly varied. This does make it important to research the subject thoroughly in order to access the type of funding and support that suits your specific needs. A top working capital provider should offer in depth advice in order to help you make that decision. We believe the most highly regarded within the industry include:

  • Funding Cirlce
  • Marketinvoice

Funding Circle

Funding Circle are one of the most popular funding providers outside of the major high street banks. Because they provide flexible terms, lengths for example can range from 6 months to 5 years, they are also able to tailor the loan to suit the needs of most SME (Small to Medium Sized Enterprises).


Although they provide other funding methods, it is within the practice of invoice finance that Marketinvoice are most highly regarded, particularly for businesses with a small monthly turnover. As terms and conditions are much less stringent in regards to their working capital invoice funding, contract lengths are much shorter for example, thus businesses that would otherwise be unable to access this type of funding can be catered for.

Expert Market is a trading name of Marketing VF Limited, which is an appointed representative of Resolution Compliance Limited (FRN: 574048) ) which is authorised and regulated by the Financial Conduct Authority. Marketing VF Limited is registered in England and Wales. Company number: 06951544. Registered office: Imperial Works, Block C, Perren Street, London, NW5 3ED, United Kingdom.