Our Trusted Lending Network
We work with a wide range of lenders to help businesses access finance solutions tailored to their individual circumstances.
what is working capital finance?
Working capital finance is a type of business funding that helps companies cover day-to-day operating expenses and manage cash flow. It can be used for purposes such as paying suppliers, covering payroll, purchasing stock, managing seasonal demand and fulfilling large orders. Depending on the business's needs, funding options may include working capital loans, invoice finance, merchant cash advances and asset-based finance. Lenders typically assess factors such as the business's financial position, turnover, trading history, credit profile and ability to repay when considering an application.
Important Points to Remember:
- Supports day-to-day operations- Funding can help businesses cover payroll, supplier payments, stock purchases and other operating expenses.
- Multiple funding options- Businesses can choose from loans, invoice finance, merchant cash advances and other suitable finance products.
- Helps manage cash flow- Working capital finance can help bridge temporary gaps between outgoing expenses and incoming payments.
- Eligibility varies by lender- Turnover, trading history, cash flow, credit profile and affordability can all influence eligibility.
How Does a Working Capital Loan Work?
Working capital finance helps businesses manage the timing gap between their day-to-day expenses and incoming payments. A business may need to pay suppliers, employees or other operating costs before it receives money from customers.
Working capital finance provides additional funds to help cover these short-term requirements, allowing the business to continue operating while it waits for expected income. The finance is then repaid according to the agreed terms, which can vary depending on the lender and finance agreement.
Business Has a Cash-Flow Need
The business has expenses to pay before enough money is received from customers.
Finance Provides Additional Working Capital
Funding provides the business with extra cash to cover its short-term requirements.
Business Uses the Funds
The funds can be used for eligible business expenses such as payroll, stock, suppliers or operating costs.
Business Receives Incoming Payments
Customer payments and other business income help restore the company's available working capital.
Finance Is Repaid
The funding is repaid according to the agreed terms and repayment structure.
Why Do Businesses Use Working Capital Finance
Covering payroll and operating costs
Buying stock and inventory
Managing late customer payments
Funding large orders
Handling seasonal demand
Expanding the business
Managing temporary cash-flow gaps
Covering unexpected business expenses
How Much Does Working Capital Finance Cost?
Working capital finance costs depend on the type of funding, the amount borrowed, the repayment period, the lender and your business's financial position. Costs may include interest, arrangement fees, service charges or other product-specific fees. Comparing the total amount repayable can help you understand the true cost before committing to an agreement.
- Interest Rates - Working capital loans may charge fixed or variable interest, depending on the lender and finance agreement.
- Arrangement and Other Fees - Some lenders charge arrangement, administration or facility fees in addition to interest. Check which fees apply before accepting an offer.
- Invoice Finance Charges - Invoice finance may include a discount charge on the funds used and a service fee for managing the facility or invoices.
- Merchant Cash Advance Costs - Merchant cash advances often use a factor rate to determine the total repayment amount, which is collected from future card sales.
- APR and Total Cost of Finance - Where applicable, APR can help you compare annualised borrowing costs. Also check the total amount repayable, including relevant fees and charges.
- Repayment Terms - The repayment structure affects your cash flow and overall cost. Check the payment frequency, repayment period and any early repayment or late payment charges.
How to Qualify for Working Capital Finance
Eligibility for working capital finance varies depending on the lender, the type of funding and your business's financial circumstances. Lenders typically assess your turnover, trading history, credit profile and ability to manage repayments when considering an application.
- # 1
Business Turnover
Lenders may consider your business turnover to assess its financial strength and ability to support the requested finance.
- # 2
Trading History
Your time in business can affect eligibility, although some lenders offer finance to newer businesses.
- # 3
Credit Profile
Your business and personal credit history may be considered when assessing your application and finance options.
- # 4
Cash Flow
Lenders may review your cash flow to understand your ability to manage repayments and ongoing business expenses.
- # 5
Existing Debts
Existing borrowing and outstanding commitments may be considered when assessing affordability.
- # 6
Business Assets & Invoices
Depending on the finance type, lenders may consider your business assets or outstanding invoices when assessing funding.
- # 7
Industry & Business Type
Your industry, business model and trading activities can influence which finance products and lenders are available to you.
- # 8
Ability to Repay
Lenders will generally assess whether your business can afford the proposed repayments based on its financial position.
How to Apply for a Working Capital Finance
Assess Your Funding Needs
Work out how much funding you need, why you need it and how long you expect to need it.
Choose the Right Finance
Compare options such as working capital loans, invoice finance and merchant cash advances to find the right fit.
Prepare Your Documents
Gather key information such as bank statements, financial accounts and details of your existing finance.
Apply and Get a Decision
Submit your application and supporting documents while the lender assesses your business and financial position.
Receive Your Funding
Once approved and the agreement is completed, the funds can be released to your business.
Alternatives to Working Capital Finance
An unsecured business loan isn't the only way to fund a business. Depending on your funding requirements, financial position and eligibility, other forms of business finance may be worth considering.
Working Capital Finance FAQs
Working capital finance is funding that helps businesses cover day-to-day expenses and manage cash flow. It can include working capital loans, invoice finance, merchant cash advances, purchase order finance and asset-based finance.
Working capital finance can be used for a range of business needs, including paying suppliers, covering payroll and operating costs, purchasing stock, managing cash-flow gaps, fulfilling large orders and supporting business growth.
A working capital loan is one specific type of working capital finance. Working capital finance is a broader term covering different funding options that can help businesses manage their day-to-day cash flow, including loans, invoice finance, merchant cash advances and asset-based finance.
Yes, some lenders offer unsecured working capital finance, meaning you do not have to provide specific business assets as security. However, lenders may assess your business turnover, trading history and credit profile, and may require a personal guarantee. Unsecured finance can also have higher costs or lower borrowing limits than secured finance.
Some finance providers offer funding to newer businesses, although eligibility varies between lenders and finance products. Your business's trading history, financial performance, credit profile, affordability and the type of finance you require may all be considered.
It may still be possible to access working capital finance with a poor credit history, but options can be more limited and potentially more expensive. Lenders may consider factors such as your current business performance, turnover, cash flow, trading history and the reason for the finance.
The time required depends on the lender, finance product and your application. Some forms of working capital finance can provide funding very quickly, while traditional business finance may require more documentation and take longer. Some providers may be able to make funding available within 24 hours.
The amount you can borrow depends on factors such as your business turnover, cash flow, trading history, credit profile, affordability and the type of finance you choose. Different lenders have different minimum and maximum funding limits, so the amount available will vary.
The cost of working capital finance varies depending on the type of finance, lender, amount borrowed, repayment period and your business's financial profile. Unsecured finance can sometimes cost more than secured finance because it presents greater risk to the lender. Always compare the total cost of finance and repayment terms before applying.
The documents required depend on the lender and type of finance. You may be asked for business bank statements, management accounts, financial statements, proof of identity, details of existing borrowing, information about your business and other financial records. Some forms of finance may require less documentation than traditional business loans.
Apply Here
Check your eligibility in 30 seconds without affecting your credit score.
