Working Capital Loans For Small Business

  • Updated: 15/01/2022
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Working capital loans for small business

Need finance to keep the business operating? try these loans

  • Capify
  • Capify
  • - has the best small business loans
  • Prospa
  • Prospa
  • - has top award winning loans
  • OnDeck
  • OnDeck
  • - offer good repayment terms
  • Moula
  • Moula
  • - makes loan applications simple
  • Shift
  • Shift
  • - has good overdrafts
  • Valiant
  • Valiant
  • - is a top marketplace for loans
  • BizCap
  • BizCap
  • - is great for fast funding

Best Working Capital Loans For Small Businesses

1 Capify Has The Best Small Business Loans

Capify is one of the pioneers of the online lending space to SME businesses in the Australian market. Based in Sydney, NSW, Capify has helped hundreds of small businesses manage their working capital to pay for short-term operational needs such as wages and inventory.

Two funding solutions are available with Capify and each solution will suit different business needs. The solutions are unsecured business loans and merchant cash advances.

Both solutions provide funding of $5,000 to $500,000 with a repayment term of 3 to 12 months within 1 day of application. Capify will generally lend up to 150% of your businesses monthly revenue. Each loan type provides funding upfront, requires no security and no financials if the loan is under $75,000.

Most businesses will prefer Capify’s unsecured small business loans, which is a traditional style loan. This means the lender loans you a lump sum that you pay back with regular daily or weekly instalments plus interest.

To qualify for small business loan you your need a minimum 12 months of business operations and  $10,000 monthly turnover or 6+ months trading history with a $20,000 monthly turnover. You can prove these requirements through your business bank statements.

If your business sales are done via EFTPOS card payments (ie. debit or credit cards) then you may prefer a merchant cash advance. With this option, Capify gives you a cash advance which you pay back via a small percentage of your daily card sales. This solution is therefore ideal for businesses with volatile seasonal revenue since the amount you pay varies in line with revenue.

To qualify for a merchant cash advance you need to $15,000+ in monthly turnover, 15 or more EFTPOS/Credit Card settlements a month and 12+ months in business.

GO TO CAPIFY
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  • Loan Type: Small Business Loans
  • Loan Amount: $5,000 - $500,000
  • Loan Terms: 3 - 12 months
  • Loan Type: Merchant Cash Advance (MCA)
  • Loan Amount: $5,000 - $500,000
  • Loan Terms: 3 - 12 months
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
2 Prospa Has Top Award Winning Loans

Prospa is an Australian owner multi-award-winning lender that has been offering unsecured business loans and lines of credit to small businesses since 2011. Their smart technology and online application process allow for fast approval which makes them a good choice for working capital loans. The lender is based in Sydney, New South Wales.

One impressive feature about Prospa is the number of awards they have won. Winning awards is a sign of excellence which is a good reason for clients to trust the lender. Awards Prospa won in 2020/2021 include:

  1. 2021 Best fintech lender by Mortgage and Finance Association Of Australia (MFAA).
  2. 2020 State excellence awards by MFAA for every state and territories
  3. 2020 Excellence in business lending by Fintech Australia

Prospa’s main product is a small business loan. With this product, you can borrow a lump sum of $5,000 to $300,000 for 3 to 36 months which you can repay daily or weekly. If your loan is under $150,000 then you won’t need to provide security and funding within 1 business day and even the same day.

One interesting feature with Prospa is that you can choose a no repayment period of 1 to 4 weeks. If you choose no repayments for 2 weeks, the loan period will extend an additional two weeks.

Prospa also offer a rolling line of credit of $2,000 to $150,000 with a 24-month renewable term. The advantage of a line of credit is that you only pay interest on what you borrow from the credit line.

To qualify for finance with Prospa you 6+ months of trading history. You can prove this  by proving 6 months of bank statement or connecting your accounting system such as Xero, Reckon, Sage when you apply.

GO TO PROSPA
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  • Loan Type: Small Business Loans
  • Loan Amount: $300,000
  • Loan Terms: 3 - 36 months
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
3 OnDeck Offer Good Repayment Terms

OnDeck was founded in New York, USA in 2007 and has since expanded into Canada, the United Kingdom and since 2015 in Australia. The country’s international presence makes them one of the largest lenders in the world, having lent $13 billion to over 110,000 businesses. In Australia, the lender is based in Sydney, New South Wales but accepts clients right across the country.

The lender offers just one type of business loan product which work as a short-term business loans, fast business loans or unsecured business loans. Regardless of the name, they are all the same which means lump-sum loans ranging from $10,000 to $250,000 with a repayment period of 6 to 24 months with no security required.

Payments are fixed with automatic daily or weekly withdrawals from your business bank account. This means no surprises since you pay the same every time.

For extra fast funding and more flexible funding arrangement and loan terms, OnDeck has developed an automated assessment system they call KOALA (Key Online Australian Lending Algorithm).

Koala allows OnDeck to offer lightning loans, which allows loans under $100,000 (which make up 60% of applications) to be approved and funded in just 2 hours. With minimal paperwork and fast funding, these loans are perfect for businesses needing temporary working capital. Loans over $100,000 will be funded next business day.

To qualify for a short-term loan from OnDeck, you must have a minimum $100,000 gross annual turnover and 1 year in business. Your business should also have no bankruptcy history and a business credit score of 500+.

 

GO TO ONDECK
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  • Loan Type: Business Loans
  • Loan Amount: $10,000 - $250,000
  • Loan Terms: 6- 24 months
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
4 Zip Business Has The Best Line Of Credit

Zip Business acquired the Australian arm of international non-bank lender Spotcap in 2019 and rebranded with the name Zip Business Capital. Despite the name change, the product remains identical, this means you can obtain a business line of credit between $10,000 and $500,000. The business operates out of Sydney, New South Wales.

Zip Business Capital is an excellent choice for working capital loans since their line of credit allows flexible borrowing. This means you can access a credit line to pay for expenses such as new inventory or expansion into new markets when the funding you require is uncertain. This presents an advantage over traditional business loans as you do not need to pay interest on funds you do not use.

Lines of credit with Zip Capital can be between $10,000 to $500,000. You can access this credit line as often as you need between the first and third months with an ongoing possibility to renew.

Each drawdown is treated as a loan of its own, meaning each withdrawal from the line can be repaid over 6 and 36 months. You can choose if you wish to pay the loan using weekly, fortnightly or monthly instalments. Each drawdown has a 2-3% risk-based fee plus interest on any outstanding balance until you close the line. There are no other fees, meaning no origination fees, direct debit costs or even early break fees.

To apply for a loan with Zip Business Capital, your business is profitable, at least 18 months trading history and have annual turnover of $200k+.

Applications can be done online and take just 5 minutes to complete. Decisions are made within 24 hours, which means you can access the credit line within a day.

GO TO ZIP BUSINESS
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  • Loan Type: Business Line Of Credit
  • Loan Amount: Up to $500,000
  • Loan Terms: Up to 60 months
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
5 Moula Makes Loan Applications Simple

Founded in 2013, Moula is one of the leading unsecured business loan non-bank lenders. Moula has a focus on developing a lending platform to assess your business creditworthiness as part of your loan application. This objective helps ensure the loan application is fast and painless.

It takes just 7 minutes to apply for a loan and a credit decision can be made within 24 hours. To speed up the application process, you can link your banking or accounting data using software such as MYOB, Reckon and Xero. This not only means faster approval but less paperwork, so popular is this option with business owners, 93% of businesses use it.

Moula offers unsecured business loans of $5,000 to $250,000 with 12 to 24-month loan terms. These loans have a fortnightly repayment schedule.

One standout feature with Moula is their transparency. Moula has no hidden fees which mean no transaction costs or penalties for early repayment. Even better, Moula advertises its interest rate costs. They have a standard origination fee of 2% and an annual percentage rate (APR) of 14.95% to 34.95%. Remember this is APR, unlike simple interest rate, all expenses are included in the final interest rate.

To give you complete confidence in their pricing, Moula is also a signatory of the Smartbox comparison tool. This tool allows for easy comparison of quotes between other lenders that offer Smartbox comparisons.

To qualify for a loan with Moula, you must show you business has been trading for 6 months and earns $5,000+ in monthly sales. If revenue exceeds $75,000, then GST registration will be required.

GO TO MOULA
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  • Loan Type: Business Loans
  • Loan Amount: $5,000 - $250,000
  • Loan Terms: 12-24 months
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
6 Shift Has Good Overdrafts

In addition to a business term loan, Shift (formerly GetCapital) differs from other lenders on this list as they offer a business overdraft of $1,000,000.

Business overdrafts allow you to access a credit facility from any Australian banking transaction account up to a certain amount, once the account reaches zero balance. This ensures your business is able to manage cash flow even when there are no funds in the business bank accounts.

The Shift business overdraft is a stand-alone facility of up to $1,000,000 of which $250,000 can be unsecured. This overdraft has an uncommitted loan term of 5 years with weekly of monthly repayments.

Shift’s overdraft links to the transaction account of the business which can be any bank in Australia. The appeal of a bank overdraft is that you can access extra funds to use as working capital when your business funds are exhausted. This benefits your business as you don’t need to apply for extra credit when you need extra working capital and you only pay interest on what you borrow.

The business overdraft with Shift has an annual percentage rate (APR) between 9.95% and 19.95%. Each time you draw from the facility, the overall balance is reset using a 48 month rolling basis, which keeps your costs easy to manage. You will also need to pay a $395 annual fee but there are no early payment fees. Repayments can be weekly or monthly.

To qualify for a business overdraft you will need GST Registration, turnover of at least $250,000 per annul and your business have 3 year of trading operations. It will also help if to have a good credit history.

 

GO TO SHIFT
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  • Loan Type: Term Loans
  • Loan Amount: $25,000 to $1,000,000
  • Loan Terms: Up to 3 years
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
7 Banjo Has Top Working Capital Options

Banjo loans have a focus on practical financial solutions for working capital. Working capital is the lifeblood of any business as it essential for payment of everyday expenses. To help you Banjo Loans offers 4 types of business loans and as a rule, no collateral is required unless the loan size is extremely high.

The two primary products Banjo offers are Banjo Working Capital Loans and Banjo Flexi Working Capital loans. Both these products are lump sum term loans for between $20,000 and $500,000, the difference is the loan terms.

Working Capital Loans have a repayment period of 6 to 24 months while Flexi Working Capital Loans have repayment over 12 or 16 months with the option of a 1 to 4 week interest-free period. Regardless of which product you choose, both give you the option of weekly, fortnightly or monthly fixed payments.

If you need a small amount of cash fast then Banjo Supply may be a better option. This option allows access to finance of $5,000 to $25,000 but has faster approval since this assessment process is automated. Since the funding amount is lower, less documentation is required and loan terms are 30 to 90 days.

Banjo loan’s last product is a bridging facility they call Single Pay. Single pay is a lump sum amount between $20,000 and $500,000 to fill any cash flow needs while your business awaits an expected payment. Typical examples of a bridging loan might be for finance while you await the settlement of property or assets that have been sold. Unlike term loans which require regular repayments, Single Pay requires settlement at the end of the agreed term which can be between 2 to 6 months.

Application with Banjo only requires you to answer ten questions and loans can be sorted within 24 hours.

Banjo ProductsFunding AmountLoan TermsTime in business to qualifyMinimum revenue to qualify
Working Capital Loans$20,000 - $500,0006, 12, 18 or 24 months2+ years$500,00+ per annum
Flexi Working Capital Loans$20,000 - $500,00012 or 15 months (1 to 4 month no repayments period2+ years$500,00+ per annum
Banjo Supply$5,000 to $25,00030 to 90 days2+ years$500,00+ per annum
Single Pay (Bridging Loans)$20,000 - $500,0002 to 6 months2+ years$500,00+ per annum
VISIT BANJO
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  • Loan Type: Working Capital Loans
  • Loan Amount: $20,000 - $500,000
  • Loan Terms: 6, 12, 18 or 24 Months
  • Loan Type: Flexi Working Capital Loans
  • Loan Amount: $20,000 - $500,000
  • Loan Terms: 12 or 16 Months
  • Loan Type: Banjo Supply
  • Loan Amount: $5,000 - $25,000
  • Loan Terms: 30 to 90 days
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
8 Valiant Finance Is A Top Marketplace For Loans

If you have no idea where to start when looking for some extra working capital, then Valiant Finance is your best starting point. Unlike other lenders on this list, Valiant Finance is a business lending marketplace or loan broker, this means they will connect you with the network of 80+ lenders which means they can help you find the right loan for you.

Valiant Finance process simply requires that you provide some basic information about your business requirements. Once the lender has the necessary information, the broker will present you with a range of options covering all loan types along with their costs and loan terms within minutes.

These solutions cover all types of loans including lines of credit, business overdrafts, secured loans and invoice finance. The main catch is that they do not tell you which lender is offering the products they recommend. Only once decide on a lender and speak with a specialist from Valiant Finance will you find out who the lender is.

You will generally have finance in the business bank account in 24 to 48 hours following application.

 

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  • Loan Type: Unsecured Business Loans
  • Loan Amount: $5,000 - $250,000
  • Loan Terms: 3 months to 5 years
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
9 Bizcap Is Great For Fast Funding

Bizcap is a fast-growing alternate lender based in South Yarra, Victoria that places a strong emphasis on helping Australian SMEs grow their business. It does this  through extremely fast funding and keeping an open mind for businesses with poor creditworthiness.

The lender offers just one product which is short-term small business loans that can be used for any business purpose including working capital. This loans comes with funding ranging from $5,000 to $1,000,000 and repayment term of 3 to 12 months.

If you need funding urgently, Bizcap is one of the fastest of all lenders. From the time you apply (provided this is done before 4pm business hours) you should expect funding in your business account in just 3 hours. With working capital often needed urgently to meet short-term payment obligations, Bizcap is one of the best lenders to consider.

Bizcap also keeps an open mind when assessing loan applications. The lender does not have a minimum credit score requirement, instead, the focus is on the financial health of your business. This means they will consider lending to you even if you have a previous default or have been declined loans from other lenders. They will even lend to you if you have loans from other lenders, something many lenders won’t do.

To successfully apply for unsecured loans or small business loans, your business should be 6 months or older and consistently achieve $10,000 in revenue each month.

 

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  • Loan Type: Unsecured Business Loans
  • Loan Amount: $5,000 - $1,000,000
  • Loan Terms: 3 - 12 months
  • Min. Revenue:
  • Min. Trading:
  • Min. Credit Score:
  • Unsecured?:
10 TIM Finance Gives Good Invoice Advances

If your business requires working capital but you don’t wish to take a loan that requires regular repayments then Invoice Finance may be an option. TIM Finance (formerly known as The Invoice Market) has funded over one billion dollars for over 350 businesses representing 22,000 invoices.

Invoice finance (sometimes called debtor finance) is a collective term that covers invoice discounting, invoice factoring and spot factoring or discounting. TIM Finance offers invoice discounting, which means you sell your accounts receivable ledger to TIM Finance in return for an immediate cash injection of 90% of the value of the invoice (once the invoice is approved).

Since TIM Finance offers invoice discounting, your business will be responsible for the collection of the outstanding invoice. This will normally be after 30 to 120 days (depending on the terms of the invoice), once collected, TIM Finance will provide the remaining 10% less any associated costs.

Using Tim Finance means no hidden fees and no lock-in contracts. No locked in daily, weekly or monthly repayments. No Security since the outstanding invoice is the security and TIMSecure™ risk protection. This means that in the event the customer does not pay the invoice, you are protected for 90% of the invoice value.

Applications for invoices are done through the TIM Finance invoice funding platform. This makes things easy since the platform helps you manage and track all invoices owing. Your first invoice needs to have a value of at least $100,000 which can be made up of multiple invoices, thereafter invoices can be as low as $2,000.

Funding AmountInvoice ValueQualificationOther details
$100,000 for the first invoice claim (can be made up of multiple invoices)90% UpfrontAnnual revenue of at least $1.0 millionInvoice is recourse (insured with TIMSecure™)
$2,000 for second invoice and thereafter10% less fee after invoice is closedAt least 4 regular paying customers
Max invoices totalling $5,000,00
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About Working Capital Loans

Working capital is what keeps a business functioning each day. Without funds on hand, it would be difficult to pay for regular expenses such as payroll, office supplies, utilities and rent. The best working capital loans for small businesses allow access to extra capital in quick time to cover any shortfalls in available capital.

While it might be easy to assume a successful business does not need a working capital loan, this is not necessarily the case. Businesses regularly take on debts to grow, purchase equipment and seize opportunities and this can mean little liquidity on hand for day to day operations. It is here that lenders that provide working capital finance come in handy.


What Are Working Capital Loans

Working capital loans are a type of business loan to help maintain cash flow. These types of loans are usually used as a short-term solution when business funds are low and there are expenses to pay.

This type of financing option is traditionally used to solve temporary financial business needs rather than to long term goals. For this reason, working capital loans have smaller maximum loan amounts and repayment terms.

What Is Working Capital

Net working capital is an accounting term that represents the differences between the current assets of the business and its current liabilities. Assets are anything the business owns or is owed so can include accounts receivables, cash on hand and inventory. Liabilities are debts the business has such as accounts payable and payments due for any loan or debts.

Current Assets – Current Liabilities = Working Capital

Working capital is a useful measure of the short-term financial health and liquidity of a company. If new working capital is positive then this means the company has a better capacity to invest and grow. Companies with negative working capital have weak financial health and therefore may struggle to grow and pay back debts.

What can you use a working capital loan for?

Working capital small business loans can be used for just about any business operations costs. Examples of such costs can include

Working capital small business loans can be used for just about any business operations costs. Examples of such costs can include

  • Manage payroll
  • Hire more staff
  • Cash flow management
  • Purchase new inventory
  • Make payments on time
  • Pay off debts and taxes
  • Fund emergency expenses
  • Office expansion/remodelling

Working capital loans are popular with capital intensive businesses that have a large turnover of stock. Such stock or inventory often requires large injections of cash which can reduce cash flow.

Other businesses that working capital loans are suitable for include seasonal businesses that may go for long periods with little cash flow.

Types of working capital loans

There are different types of working capital loans, the key feature all loans have is their intention to fill a temporary funding need.

Working capital short-term loans

Since working capital loans are generally designed to help small business owners with their pressing business expenses, they tend to have shorter repayment terms. Usually, terms will range from 1 month to 12 months.

Since the repayment period is shorter, you will find the maximum amount of business finance you can borrow is lower than for business loans. For this reason, short-term loans are not the best option for high-cost investments such as real estate and expensive equipment.

Since working capital loans are designed for immediate funding shortfalls, they will usually be unsecured loans so that fast approval is possible.

You will often find online lenders offer working capital loans since they are much the same as unsecured loans. Indeed, working capital loans fall under the unsecured loans umbrella, some lenders don’t even distinguish between the two. For this reason, the same rules of unsecured loans apply for working capital loans.

You will sometimes see lenders call these loans small business working capital loans, cash flow loans and even payroll loans.

Advantages and disadvantages of working capital loans

Pros

  • You have more cash on hand to manage cash flow issues
  • No collateral is usually needed (unless you loan amount is above $150,000)
  • Usually short term with frequent repayments so interest costs don’t accrue
  • Can be used for any business purpose
  • Applications can be processed quickly with fast funding

Cons

  • Working capital loans provide relief due to lack of capital but you still need to repay the loan
  • As the loan short term with no security, interest rates can be higher
  • If you access working capital loans frequently, it can harm your credit rating
  • Frequent repayments can be a burden

Business loans or unsecured business loans

Business loans is an umbrella term for all types of business loans including unsecured business loans and secured business loans. If you see a lender offer business loans, especially unsecured business loans, chances are high that these loans can be used as working capital business loans. This is because working capital loans are usually smaller amounts that don’t require the use of security. Working capital loans also are usually needed fast and secured loans take longer to process.

For example, unsecured business loans with online lenders typically come with loan terms ranging from 3 months to 36 months. So if you only need funding for less than one year, the loan would be similar, if not exactly the same as a working capital loan.

Unsecured loans have a fast application process with a turnaround time from application to funding of around 1-3 business days. As these loans are unsecured, the lenders are taking on greater risk so loans come with higher interest rates compared to secured loans. You will also need to

Like with working capital loans, unsecured business loans have eligibility criteria and often a minimum credit score. For this reason, unsecured loans are not for startups or new businesses since lenders require a minimum time in trading.

What is a unsecured Business Loans

Working capital business line of credit

While working capital loans or unsecured business loans entail a lump sum at the start of the loan, a business line of credit provides the business with a credit facility.

The use of a credit facility allows your business to borrow as much as they need and pay back the loan without a set schedule. This practice helps avoid paying interest on borrowings that are not used since you only pay interest on what is drawn from the facility.

A working capital line of credit is sometimes called revolving credit. What this means is that borrowers can reborrow for the facility, what they have paid back into it without the need for a new loan application. This gives the business maximum flexibility since it gives them an emergency cash flow option should the need arise.

What is a line of credit

Merchant cash advance

This type of loan option is technically not a loan but an advance, which means the lender lends you cash in return for a share of future business revenue.

This type of finance option is only for businesses the make payments through EFTPOS systems or card payments such as debit and credit cards. This is because the financial institution that provides the advance takes a portion of the daily card sales. This is typically done until the advance plus interest and any other additional fees are repaid.

A merchant cash advance often comes with higher interest rates than other types of funding but allows you to access funds very quickly. Businesses that have seasonal or unreliable revenue streams suit this type of funding option since repayment is matched the volume of daily takings. This means you pay back more when turnover is high and less in times of low revenue.

What is a merchant cash advance

Invoice finance

Invoice finance or debtor finance allows you to obtain a cash advance for unpaid invoices or accounts receivable. Invoice financing is a form of business lending where you sell outstanding invoices to a lending agent in return for an advance on the value of these invoices.

The advantage of this type of finance allows you to maintain cash flow since you can get 80-90% of the value of invoices immediately. This allows you to avoid the need to wait for 30 to 120 for the client to pay their debts. When the client pays the invoice in full, the lender will pay the remaining 10-20% less their fees.

Invoice finance generally comes in two types, invoice factoring and invoice discounting. With factoring, the lender will be responsible for collecting the debt from the client. This option means your business is free from the hassle of managing an account receivable system. Invoice discounting can reduce expenses since your business will be responsible for collecting the debt from the client.

What is invoice finance

 


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