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Working Capital

A working capital loan is used to finance the everyday operations of a business such as sales and marketing, product development, wages and other activities.

KEY TAKEAWAYS

  • A working capital loan is a loan taken to finance a company's everyday operations.
  • Working capital loans are not used to buy long-term assets or investments; they are used to provide working capital to covers a company's short-term operational needs.
  • Companies with high seasonality or cyclical sales may rely on working capital loans to help with periods of reduced business activity.
  • Working capital loans are often tied to a business owner's personal credit, so missed payments or defaults may hurt their credit score.