Working Capital Loans UK 2025: Complete Guide
Finance cash flow gaps, cover supplier payments, and manage seasonal business cycles. £5k-£500k with approval in 48-72 hours.
What is a Working Capital Loan?
Working capital loans provide short-term funding for day-to-day operations - not for buying assets. Used to cover:
- Supplier payments - Stock purchase when cash is tied up
- Payroll - Staff wages during slow periods
- Seasonal gaps - Bridge quiet months
- Unexpected expenses - Equipment breakdown, urgent repairs
- Growth funding - Fulfill large orders requiring upfront costs
Types of Working Capital Finance
1. Short-Term Business Loan (3-18 months)
- Amount: £5,000-£250,000
- APR: 8-25%
- Approval: 48-72 hours
- Fixed monthly payments
2. Business Line of Credit
- Amount: £10,000-£500,000 revolving credit
- APR: 10-20% (pay only on used amount)
- Approval: 1-2 weeks
- Flexible draw-down and repayment
3. Invoice Finance
- Amount: 80-90% of outstanding invoices
- Cost: 1.5-4% discount fee
- Approval: 24-72 hours
- Repaid when customer pays invoice
4. Merchant Cash Advance
- Amount: 1-3× monthly card sales
- Cost: Factor 1.15-1.45 (25-80% effective APR)
- Approval: 24-48 hours
- Daily repayment from card sales
Who Provides Working Capital Loans?
Fast approval lenders (48-72 hours):
- iwoca: £1k-£200k, 6-20% APR, 72 hours
- Funding Circle: £10k-£500k, 6-18% APR, 2 weeks
- MarketFinance: £10k-£750k, invoice & term loans
- Capitalise: £3k-£500k, fast decisions
Cost Comparison
£20,000 for 6 Months (Cover Quiet Season)
| Option | Monthly Payment | Total Cost |
|---|---|---|
| Overdraft (15% EAR) | Flexible | £1,500 |
| Working Capital Loan (12% APR) | £3,558 | £1,348 |
| Invoice Finance (3% fee) | Flexible | £600 |
| Merchant Cash Advance (1.25x) | Daily % | £5,000 |
Cheapest: Invoice Finance (if you have B2B invoices)
When to Use Working Capital Finance
Good uses:
- ✅ Seasonal stock purchase
- ✅ Bridge payment terms gap (you pay suppliers in 7 days, customers pay you in 60)
- ✅ Fulfill large unexpected order
- ✅ Cover costs while awaiting payment
Bad uses (don't use working capital for):
- ❌ Equipment purchase (use asset finance instead - cheaper)
- ❌ Property (use commercial mortgage)
- ❌ Long-term expansion (use term loan - lower rates)
- ❌ Paying off existing debts (consolidation loans better)
Conclusion
Working capital loans solve temporary cash flow gaps (6-18 months). Best options:
- B2B businesses: Invoice Finance (1.5-4%, cheapest)
- Card-accepting businesses: Merchant Cash Advance (fastest, flexible)
- General businesses: iwoca or Funding Circle (8-18% APR, fast)
- Existing bank customers: Overdraft increase (cheapest if short-term)
Compare Working Capital Options
We'll match you with the most cost-effective working capital solution for your cash flow needs. Compare rates and get funded in 48-72 hours.
Compare Working Capital