Grow your working capital with a business loan

Finance your everyday business expenses like inventory and payroll with a working capital loan. Borrow up to £500,000 and benefit from flexible repayment options.

  • Apply in minutes
  • Repay early with no fees
  • From 1 day to 24 months
Apply nowSee how much you could get

Applying won't affect your credit score

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What is working capital?

Working capital is the lifeblood of day-to-day operations. Working capital is essentially the spare cash (liquidity) available in your business that you can use to spend, invest and manage costs. In technical terms, this is the difference between the assets you currently have (think cash, accounts receivable, and inventories) and its current debts (liabilities). This figure can be positive – you have cash available – or negative, and is a key measure of your business’s financial health.

What is a working capital loan?

Working capital loans are a way to access extra liquidity when you need it – for investing in new equipment for example, or meeting payroll.  

Small businesses can use working capital loans to pay for rent, salaries, equipment, marketing, and other expenses. With growing expenses or a drop in sales, a business working capital loan can help with seasonal shifts, or unexpected costs. Or you can use this type of loan to fund inventory after a new contract win.

How does a working capital loan work?

When you get a working capital loan, the lender gives you a sum of money – known as the principal. You can then use this money for your business's expenses, such as payroll, rent, utilities, materials, inventory, and tax. 

  • The lender will determine the loan terms, such as the interest rate and repayment period. 
  • They will base their decision on your creditworthiness and their own policies. 
  • During the loan period, you must make regular payments that include both the loan amount and interest. 

These loans can be secured or unsecured – while unsecured loans are faster to get, they may bring higher interest rates and limits on the amount you can borrow.

What is working capital finance?

Working capital finance is the money a business needs for everyday expenses. Small business owners need enough money to run their business smoothly and take advantage of growth opportunities.

All businesses, big or small, need money to pay their short-term debts. These obligations include paying suppliers, covering payroll, managing inventory, and meeting daily expenses. If your business doesn't have enough money, it can struggle to pay bills and cause problems.

Your business can receive different types of working capital finance, depending on its specific needs. Common ways businesses finance their operations include loans, credit lines, trade credit, and factoring. You have to consider the pros and cons of each option when choosing the best financing solution.

How to get a working capital loan?

Obtaining a working capital loan involves a few key steps. First, examine your current finances and predict future needs to figure out how much working capital you'll need. Next, you should research and approach lenders who offer working capital loans. 

The lender will review your business's finances, credit history, and collateral (if needed) to decide if you qualify for a loan. Once approved, you can avail of the funds and start using them to address your working capital needs.

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How to get a working capital loan with iwoca

  1. Apply in minutes

    Getting a working capital loan with us is straightforward, quick and simple. We’ve designed the process to be fast and flexible for your small business.

  2. Get a quick decision

    We’ll take up to 24 hours to verify your details and give you a decision based on your eligibility. You can choose whether to go ahead after we’ve sent you an offer.

  3. Take your working capital loan

    If you accept our offer, we’ll transfer the funds to your account and you can start spending the money. Our record is just 2 minutes and 37 seconds.

Alternatives to working capital loans

Here's a quick rundown of other forms of working capital financing options for your small business:

‍Line of credit loans

A business line of credit or line of credit loan gives you access to a set amount of funds that you can draw from whenever you need, similar to a business credit card. You only pay interest on the amount you actually use, and once you repay the borrowed amount, your credit line is replenished.

Invoice financing

With invoice financing, you can borrow money against your outstanding invoices. The lender advances you a percentage of the invoice amount, and you pay them back, plus fees, when your customers pay their invoices.

Merchant cash advances

A merchant cash advance, or revenue-based finance, allows you to borrow a lump sum of money in exchange for a percentage of your future credit card sales. The lender takes a fixed percentage of your daily credit card transactions until the advance, plus fees, is repaid.

Short-term business loans

Short-term business loans are similar to term loans but have shorter repayment periods, typically ranging from a few months to a couple of years. They often have higher interest rates and can be either secured or unsecured.

Asset finance

With an asset-based loan, or asset finance, you can borrow money using your business assets as collateral, such as inventory, equipment, or accounts receivable. The amount you can borrow is usually based on a percentage of the value of the assets you're using as collateral.

What can I use a working capital loan for?

A working capital loan provides businesses with the flexibility to use the funds as per their specific needs. Some common applications of a working capital loan include:

  • Meeting short-term financial obligations, such as paying suppliers or covering employee wages
  • Funding inventory purchases to maintain adequate stock levels
  • Expanding marketing and advertising efforts to attract more customers
  • Investing in technology upgrades and infrastructure improvements
  • Addressing seasonal fluctuations or unforeseen expenses.

Advantages of a working capital loan over other financing options

A working capital loan offers several advantages over alternative financing options:

  • Speed and convenience: Working capital loans can provide fast access to funds with shorter approval and funding times than other business loans.
  • Flexible use: A working capital loan allows businesses to use the funds for different needs related to working capital.
  • Business continuity: A working capital loan improves financial stability by addressing cash flow gaps and ensuring seamless business operations.
  • No loss of equity: With a working capital loan, you keep complete control and ownership of your business. No need to seek investors or sell shares, so there's no equity dilution.
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Working capital loan FAQs

What are the typical interest rates for working capital loans?

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The interest rates for working capital loans can change based on different factors. These factors include:

  • The borrower's creditworthiness
  • The lender's policies
  • Market conditions
  • The loan amount and duration

Typically, working capital loan interest rates can range from a few percentage points above the prime rate to higher rates for borrowers with less favourable credit profiles.

What is the difference between working capital loan and working capital finance?

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The terms "working capital loan" and "working capital finance" are often used interchangeably. Working capital finance includes loans, trade credit, lines of credit, and cash reserves for funding. On the other hand, a working capital loan specifically refers to borrowing funds from a lender to fulfil working capital needs.

Can I get a working capital loan with bad credit?

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While your credit rating is a factor in whether you can get a working capital loan, in practice, there are loan types for all businesses – even those with bad credit. If your credit score isn’t ideal, you may be subject to extra checks, or need to provide a personal guarantee.

Your credit score may also reduce the amount of capital you can borrow for a working capital loan, but it may still be possible with collateral or a loan guarantor. Alternatively, you may still be able to borrow, but at a higher interest rate than would otherwise be the case.

Can I get a working capital loan as a startup or small business?

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Yes, there are many providers that specialise in lending to small businesses and startups. For example, at iwoca, our Flexi-loan can lend new businesses up to £10,000, and is a great way to start building your credit score.

Fund your future with a working capital loan

The iwoca story

Over the past eleven years iwoca has grown from an ambitious fintech start-up to one of the fastest-growing and biggest business lenders in Europe. Now we're a team of around 400 in London, Leeds and Frankfurt working towards the goal of funding one million small businesses.

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Questions? We're here to help

Call us at 020 3778 0274 from Monday to Friday (9am - 6pm). We can take your business loan application over the phone, or answer your questions about applying online.

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