Funding Guide

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 for your business growth.

£5k-£500k

Funding range

48-72hrs

Approval time

1.5-4%

Best rates

4 types

Options available

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

Short-Term Business Loan

3-18 months

Amount:

£5,000-£250,000

APR:

8-25% APR

Approval:

48-72 hours

Feature:

Fixed monthly payments

Business Line of Credit

Revolving credit

Amount:

£10,000-£500,000

APR:

10-20% APR

Approval:

1-2 weeks

Feature:

Flexible draw-down and repayment

Invoice Finance

B2B invoices

Amount:

80-90% of outstanding invoices

Cost:

1.5-4% discount fee

Approval:

24-72 hours

Feature:

Repaid when customer pays invoice

Merchant Cash Advance

Card sales

Amount:

1-3× monthly card sales

Cost:

Factor 1.15-1.45

Approval:

24-48 hours

Feature:

Daily repayment from card sales

Who Provides Working Capital Loans?

iwoca

£1k-£200k6-20% APR72 hours

Funding Circle

£10k-£500k6-18% APR2 weeks

MarketFinance

£10k-£750kInvoice & term loans

Capitalise

£3k-£500kFast decisions

Cost Comparison

£20,000 for 6 Months (Cover Quiet Season)

Overdraft (15% EAR)

Monthly Payment:

Flexible

Total Cost:

£1,500

Working Capital Loan (12% APR)

Monthly Payment:

£3,558

Total Cost:

£1,348

Invoice Finance (3% fee)

CHEAPEST

Monthly Payment:

Flexible

Total Cost:

£600

Merchant Cash Advance (1.25x)

Monthly Payment:

Daily %

Total Cost:

£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 (Do Not 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 will match you with the most cost-effective working capital solution

Compare rates and get funded in 48-72 hours for your business growth

Compare Working Capital

Frequently Asked Questions

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, payroll during slow periods, seasonal gaps, unexpected expenses, and growth funding for large orders requiring upfront costs.

What are the different types of working capital finance?

Main types: Short-term business loans (3-18 months, £5k-£250k, 8-25% APR), Business line of credit (£10k-£500k revolving, 10-20% APR), Invoice Finance (80-90% of invoices, 1.5-4% fee), and Merchant Cash Advance (1-3× monthly sales, factor 1.15-1.45).

Which is cheapest for working capital?

Invoice Finance is cheapest at 1.5-4% (if you have B2B invoices). For example, £20k invoice = £400-£800 fee vs £5,000 for MCA. However, MCA is faster (24-48 hours) and more flexible (daily repayment from card sales).