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Working Capital Loan - What You Need to Know

What is a Working Capital Loan

When it comes to loans, they are most often categorised by their purpose. Working Capital Loans, as the name suggests, are loans which fund everyday business operations. They are mainly used to fund the more menial day to day costs of running the business and provide working capital for short-term purposes as opposed to buying long-term assets or covering long-term growth.

When might a Working Capital Loan be required for a UK business?

A Working Capital Loan might be needed if a company doesn't have adequate funds to cover their day-to-day expenses. Companies that are highly based on certain seasonal activity and sales can rely on a Working Capital Loan to tide them through the periods that are often a lot quieter. The loan is usually repaid by the time the company hits its busy season and no longer requires the extra financial support. It can help cover payroll, rent and other debt payments.

Pros & Cons of a Working Capital Loan

As with any loan or financial decision within a business, there are pros and cons to a Working Capital Loan. The first of these pros is how quickly it can help to rectify a business emergency. In just 24 hours from approval, businesses can have the cashflow needed to tide them over. Research has proved that over a quarter of small businesses fail within the first 12 months due to insufficient funds, but Working Capital Loans can help pump cash back into a business and give it that integral push needed to tide them over until revenue increases. There is also no collateral required when taking out the loan which means there's no risk to valuable assets. The repayment periods are also short which means the loan can be paid off quickly and the business isn't left with large debts hanging over them or years of interest to pay.

As with any investment, there are disadvantages too which you need to be aware of. Working Capital Loans usually have a higher interest rate in comparison to normal bank loans. This is because the lender considers them more of a risk as there are less strict qualification criteria for the loan in the first place. It is also not a viable solution for long-term business plans or a project that requires a longer repayment period.

Taking out a Working Capital Loan can be quite confusing, to ensure you have as much clarity as possible, we have compiled a handy FAQ guide below.

Start Your Working Capital Loan Application With Us Today!

To learn more about Working Capital Finance options, do not hesitate to get in touch with UK Business Loan today. We are commercial finance finders you can trust and have already helped many businesses in the UK. Simply complete our 4-step online application form online and start your Working Capital Loans journey.

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Have Working Capital Loan Questions?

What makes a good Working Capital Loan?

If you are looking to identify good Working Capital Loans, there are certain things you should look out for. It needs to be flexible, transparent and above all, allow you to access your funds quickly.

Am I applicable?

Unlike the majority of loans (both business and personal) there is no collateral or security required for a Working Capital Loan. As long as you have a good credit history you should get accepted. The bank or Non-banking Financial Company (NBFC) will verify your eligibility and, if satisfied, give you the loan.

Is a Working Capital Loan in the UK secure?

The majority of Working Capital Loans are secure, it is only companies or business owners with a high credit rating who may be eligible for an unsecured loan. In this case, they won't have to put down any collateral to secure the loan.

How Can I Apply for a UK Working Capital Loan?

To apply for a UK Working Capital Loan, all you need to do is fill in the form at the top of this page and you will be passed through and assed by a potential lender. The form is a simple 4-step process and will tell you all you need to know to get your application underway.

Experts Quote

"Working Capital Finance is a popular form of finance for Shipping and Freight operators, historically, who may not receive the payment of an invoice until a delivery of the good has been made, which could be a long lead time when considering imports/exports via shipping.


The working capital finance method would pay the invoice ahead of the shipping delivery being made, for example, with the business knowing the invoice payment would be paid on delivery after a certain period to ensure the shipping company had capital available to continue its operations.


Working capital works by increasing the working capital available to a business.


It can also be commonly opted for as a finance option when a corporation is about to take on a large contract or subcontract, or looking to invest into a new vertical or product. "

Ian Gray

Finance Expert - 30+ Years of Experience in Accounting & Finance

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Ian Gray
About the expert

Ian Gray

Finance Expert - 30+ Years of Experience in Accounting & Finance

Date published: Sun 26 Dec 2021

Latest edit: Thu 17 Aug 2023

Independent business finance experts covering the North West of England and North Wales. We specialise in unsecured business funding, including VAT and Tax concerns, also offering commercial finance to SME owners. IRG Capital Finance, Royal House, Upper Northgate St, Chester, CH1 4EE . Company Number: 14693947 | ICO Registration Number: CSN9053333 | IRG Capital Finance Ltd. T/As UK Business Loan.