Working Capital

A working capital loan is a loan that is taken to finance a company’s everyday operations. These loans are not used to buy long-term assets or investments and are, instead, used to provide the working capital that covers a company’s short-term operational needs.

Those needs can include costs such as payroll, rent, and debt payments. In this way, working capital loans are simply corporate debt borrowings that are used by a company to finance its daily operations.

  • 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.