Options for Working Capital Financing

If you own a small business, it’s likely that you have needed financing at one point or another. When you are unable to meet your business’s working capital needs, there are several options to consider.

Credit Cards

For many small business owners, credit cards are an appealing option. Once you have a business credit card, you can use it whenever you need to without applying for additional financing. While this can be convenient, keep in mind that missing or late payments can increase already high interest rates and can negatively affect your credit score.

Merchant Cash Advance Financing

Another way to receive cash for working capital is to use advance financing. If your business has had a large amount of credit card sales, this option might work for you. You don’t need to put up any collateral for this type of financing. Instead, the lender will receive a portion of your daily credit card sales until you have paid back the advance and any fees. 

Invoice Financing

With invoice financing, you are paid the value of your invoices by a third-party company. You are still responsible for the collection of invoices and are given 12 months to pay back the amount of the loan.


Similar to invoice financing, a factoring company pays you for your invoices, however there are some differences. The factoring company will pay you a percentage of the value of your invoices and will give you the rest, minus fees, when they receive it. They will also be responsible for collecting the invoices.

Trade or Vendor Credit

Trade credit, or vendor credit, is commonly used for financing working capital. When using this type of credit, you receive supplies and are then expected to pay for them by the end of a certain time period. In some cases, your vendors might not require you to pay in full and will allow you to carry a balance. This can be helpful if you are in need of inventory before you are able to pay your current balance.

Business Line of Credit

Like a credit card, once you are approved for a business line of credit, you can use it whenever you need it. However, unless your business credit scores are very high, you may have difficulty qualifying for a line of credit.

While not having the working capital you need can make things difficult for your business, the good news is that there are several ways to get funding. Be sure to examine the pros and cons of each option to find the best solution for you.