What a working capital loan is, and how it works
On $10,000, costs range from a few hundred dollars to several thousand. NerdWallet defines a working capital loan as a short-term business loan for day-to-day expenses: rent, payroll, utilities, supplies, inventory and costs that build up, like taxes [1]. It is usually repaid over a short period with interest.
"Working capital loan" is a use, not one product. Lenders sell it as a line of credit, a short term loan, an SBA loan or a sales-based product. Which one you get decides the cost, the payment schedule and how fast it arrives.
Working capital, in one line
What you own that turns into cash within a year (cash, receivables, inventory) minus what you owe within a year (bills, payroll, short-term debt). A cash gap is a stretch where the bills are due before the receivables and inventory turn into cash.
What each way costs on $10,000
Here is $10,000 of working capital priced six ways, at both ends of each published range. Loans assume 12 equal monthly payments. The line of credit assumes the full $10,000 is drawn and paid down the same way; drawing less, or for less time, costs less.
| Product | Published price | Cost on $10,000 |
|---|---|---|
| Bank loan or line, if you qualify | 6.37% to 10.98% average [4] | $348 to $605 over a year |
| SBA microloan | Generally 8% to 13% [6] | $439 to $718 over a year |
| Line of credit, fully drawn | 10% to 99% APR [4] | $550 to $6,130 over a year |
| Online term loan | 14% to 99% APR [4] | $774 to $6,130 over a year |
| Invoice factoring | 1% to 5% of the invoice per month [5] | $100 to $500 for each month the invoice is open |
| Merchant cash advance | Factor rate 1.1 to 1.5 [4] | $1,000 to $5,000, however fast you repay |
Two things the table shows. First, the cheapest options are also the slowest and strictest, so the right choice depends on what you qualify for and how soon you need it. Second, the high ends land in the same zone: about $6,130 for a 99% APR loan repaid over a year, and $5,000 for an advance at a 1.5 factor rate. But the advance usually collects in months, not a year, and the same dollars over less time mean a much higher estimated APR.
Match the product to the shape of your gap
| Your gap looks like | Usually the best fit | Why |
|---|---|---|
| Comes and goes through the year | Line of credit | Draw only when short; interest is charged only when the line is in use [3] |
| One-time, with a clear payback date | Short term loan | Fixed payments and a fixed end date |
| Customers pay invoices in 30 to 90 days | Invoice factoring | Turns invoices into cash; your customer pays the factor [5] |
| Large and ongoing, for an established firm | SBA 7(a) or CAPLines | Lower capped rates and terms up to 10 years [1] [3] |
| Small, and you were turned down elsewhere | SBA microloan | Up to $50,000 for working capital and inventory [6] |
| Steady card sales, no other option fits | Merchant cash advance, as a last step | A purchase of future receivables, collected from sales; fast but costly |
NerdWallet notes that compared with term loans, working capital lines of credit give you more room to borrow what you need when you need it [1]. If your gap repeats every year, a line set up in a good month is usually cheaper than a new loan taken in a bad one.
SBA programs built for working capital
The SBA lists short- and long-term working capital among the allowed uses of a 7(a) loan [3]. NerdWallet names SBA 7(a) loans its top choice for large working capital needs, for established businesses with strong credit, with terms up to 10 years for working capital [1]. The SBA also has line-of-credit versions:
- CAPLines: SBA-backed revolving lines for short-term and cyclical needs. Except for the builders line, the maximum maturity is 10 years [3].
- Working CAPline: an asset-based revolving line for firms that cannot meet the credit standards of long-term lending. It is repaid as short-term assets, like receivables, turn into cash, and it generally fits businesses that sell on credit to other businesses [3].
- 7(a) Working Capital Pilot: a monitored line of credit within the 7(a) program, with an annual guaranty fee so you pay for the years the line is in use [3].
Variable 7(a) rates are capped by the SBA at prime plus 3% to 6.5%, depending on size. See business loan rates for today's caps. The trade is time: bank and SBA funding can take several weeks or more [1].
How fast working capital arrives
NerdWallet's guide gives the general timing: online lenders may review an application within hours and fund within a few days, while traditional lenders take from several days to a few weeks and SBA loans may take several weeks or even a few months [1].
So the time to arrange working capital is before you need it. A line of credit approved in a strong month sits ready for a weak one, and you pay interest only on what you draw. If you are already short, see same day business loans for what fast money costs and how to keep it small.
Before you borrow: shrink the gap first
Not every owner who applies gets funded. In the Federal Reserve's 2026 report, 42% of applicants got the full amount they sought, 36% got some or most, and 22% got none [2]. Shrinking the gap first means you need less, which helps on both price and approval.
- Invoice the day the work is done, and offer a small discount for early payment.
- Ask key suppliers for longer terms. Thirty extra days from a supplier is often the cheapest working capital there is.
- Hold less slow-moving stock, and put the cash into items that turn quickly.
- Work out the exact amount and the exact date you will repay it before you apply. Lenders ask, and the answer keeps you from borrowing too much.
When you are ready, Batch Capital, our funding team, can show which working capital options fit your sales and timing, and what each costs in dollars.