Best Working Capital Loans for Small Business & Corporate Clients

Many Australian small businesses see their cash flow fluctuate throughout the year. Whether this is because business is seasonal, a major event causes disruption to revenue or one month just happens to be slower than usual, a  short-term working capital loan on an instant basis, could be the answer.. Small business loans Australia lists the best working capital lenders extending credit in 2021. These are highly respected online lenders with a great reputation across Australia who are able to approve loan applications within hours, and get money in the bank the next day. Some of these working capital financing lenders are more rigid in their requirements and some of them are oriented towards small business with bad credit. Our individual business lender reviews detail all of this and more.

Working Capital Loans – Base Figures

Loan TypeSecuritiesTermsAvg Loan SizeEstimated Interest Rate
Working Capital LoanUnsecured or Secured1-24 months$35,0001.75% p/m

Best Working Capital Finance Options

#1 Lender in Australia Best Rated on Small Business Loans Australia

Est. 2011

Loans size & Terms

$5,000 to $300,000

Secured and Unsecured Loans

Prospa Business Loans Review
Pros
  • Funding: $5,000 to $300,000
  • Countless industry awards, 6 received in 2020 alone
  • Funding granted within 48h
  • 4.9 / 5 rating on TrustPilot
  • 28,000+ Australian Businesses Funded to date
  • ASX Traded Company
  • Clear Terms, Conditions and Repayments
  • Excellent website and onboarding
Cons
  • Had low approval rate between May-Aug 2020 due to COVID
#2 The Industry Veteran

Est. 2002

Loans size & Terms

$5,000 to $300,000

Unsecured Loans

Capify Business Funding Review
Pros
  • Fewest documents required for sign up
  • Industry veteran for 17 years
  • the FIRST Australian online business lender
  • 99% positive client reviews
  • Multiple banking awards
  • More than $500,000,000 in funding since inception
  • Global brand
Cons
  • Min monthly turnover $10,000
  • Smaller scale than Prospa
  • 3% origination fee
#3 Diverse Solutions for Established Businesses

Est. 2013

Loans size & Terms

$25,000 to $1,000,000

Secured and Unsecured Loans

GetCapital Review
Pros
  • Most bespoke financing solution
  • Term Loans available
  • Line of Credit available
  • Business Overdraft available(with illion Data Solutions)
  • Equipment Financing available
  • Deloitte's 2018 Tech Award
  • No early repayment fees
  • No drawdown fees
  • Low annual fee
Cons
  • Min 9 months in business
  • Min $100,000 annual turnover
#4 Bad Credit Businesses Specialist

Est. 2018

Loans size & Terms

$5,000 to $200,000

Unsecured Financing

Lumi Business Finance Review
Pros
  • Newer Businesses Accepted
  • Bad Credit Borrowers Welcomed
  • 2 Hour Approval
  • 93% Positive Reviews
Cons
  • Potentially higher interest rate
  • Smaller and less experienced lender than our top choices
#5 The Global Mega-Brand

Est. 2015

Loans size & Terms

$5,000 to $250,000

Secured and Unsecured Loans

OnDeck Review
Pros
  • Great reputation in Australia and globally
  • 95% satisfaction from clients in Australia
  • Annual interest rate starts at 9.99%
  • Origination fee of 2.5% (lower than most lenders)
  • Traded in the NYSE
  • Application in 10 minutes
  • One of the best known lenders in the world
Cons
  • Not headquartered in Australia
  • Min $100,000 annual turnover

Find The Right Working Capital Requirement Online

Before rushing to apply with multiple companies, it’s worth considering a business loan marketplace.  Become business loans specialise in small business working capital loans. Their proprietary algorithm performs the role of a digital loan broker, matching SMEs with lenders that are the best fit for their business and working capital requirements. It’s free to use, doesn’t impact an applicant’s credit score and everything can be completed within minutes. 


Read Our Become Business Funding Review

What is Working Capital?

To understand working capital loans it’s important to understand what working capital is and when a working capital facility might be required.

Going by the textbook definition, working capital is a company’s cash position (whether positive or negative) once current liabilities have been deducted from current assets. In short, working capital is the cash a business will have left after taking into account the money that is due to come in and out of the business over the next 12 months. 

This is the crucial difference to simply knowing how much cash is currently sitting in a business bank account. By understanding the working capital of their business, and what the incomings and outgoings are likely to be in the immediate year, business owners can plan accordingly. 

If it looks like working capital will be negative, or working capital will be positive but not enough to match the levels that a business owner wants to invest in the business, then a working capital loan could be necessary.

Seeing as our focus is on understanding the best working capital loans available in Australia, we’ll leave our explanation on what working capital is here. Business owners who would like to understand more about what working capital is may find this guide we found on the internet useful.

Are Short-Term Working Capital Loans Anything Like PayPal Working Capital?

 

PayPal working capital is a very popular solution for online sellers who get paid via PayPal, in this regard it’s very similar to Amazon Lending. PayPal working capital enables individuals and small businesses to borrow a short-term amount based on the average PayPal income they have had as an online seller. The amount businesses can borrow under PayPal working capital is quite limited, it’s up to 25% of a merchant’s PayPal sales over the past year (up to $200,000 for those selling  $50,000 per month). The interest rate on PayPal Working Capital financing is between 15%-30%, annualized. It’s completely designed for businesses who have a significant PayPal seller’s history, income made via any other channels is not included in the risk assessment by PayPal. PayPal provides sellers with a total payback figure at the onset of the loan, meaning it’s easy to understand how much is to be repaid, but the interest is calculated on the principal amount, meaning interest does not go down as borrowers repay the loan.

This is the same way factor rates work. Learn about interest rates and factor rates through our business loan repayment calculator page. Uniquely, PayPal working capital will automatically deduct payments from future PayPal sales, meaning borrowers don’t need to worry about manual repayments and the repayment amount will always be relative to the volume of sales the business is making.

 

Our recommended online business lenders are similar to PayPal working capital but provide more flexibility. Rather than just PayPal income determining how much a business can borrow, business lenders will of course consider all revenue streams and decide how much to lend based on this. Online business lenders provide quick working capital finance directly into a borrowers bank account and can also set up a direct debit to ensure borrowers can make payments on an automated basis and not have to worry about forgetting to make a repayment. The repayment amount is usually fixed, so would not be relative to the future income of a business. If loan repayments that are in line with future income sound appealing then a merchant cash advance would fit the bill too. As of March 2021, Capify has also launched the COVID Flexible Loan – an adaptable, short term working capital solution that links repayments with future revenue.

In general, the lending amount provided by an online lender is usually between 30 and 50 per cent of the applicant’s sales over last year, with relatively high interest rates (10%-30% annualised).

To summarise, the biggest difference between PayPal working capital and online business lenders are as follows:

  • Australian small business lenders are more flexible in terms of the financing they can provide and the repayment schedule.
  • With Australian small business lenders, businesses are not tied to the amount of money they receive on Paypal. If SMEs are selling through other payment gateways then the PayPal working capital alternatives will take the proceedings into account.Paypal won’t.
  • Some of the companies offering working capital finance in Australia offer a higher cap on the amount of money borrowers can receive through them.
  • When borrowers receive working capital financing from an Australian lender they are not borrowing money from an international conglomerate, but rather an Australia-based company (in virtually all instances), or an American lender with a subsidiary in Australia which includes local employees in local offices.
  • Invoice factoring solutions are offered by some online lenders, essentially lending money against unpaid invoices.

With a business lender, loans are usually multi-purpose. Uses can include equipment financing or fit out. The money is not really designated for a specific purpose, as long as it is used for business and not personal reasons.

Sources of Working Capital Loans in Australia

We have listed what we believe are the leading working capital loan providers* in Australia. All of these lenders are easily accessible as they accept online applications which can be completed in minutes. They are, however,not the only option. “Working Capital Loans” is a very loose definition that relates to immediate lending for the day to day operations of a business. It’s something that banks and credit unions can also provide (although slower than online lenders). Additionally, businesses could always sell debt notes to investors or sell a portion of equity to angels/investors in order to raise capital quickly and use it for whichever purpose needed, but we feel our sources of working capital financing in Australia are a good place to start.

*Our featured online lenders offer a variety of funding options, including equipment loans and a business line of credit (more on these and other working capital facilities below).

Best Working Capital Loans Compared

Working capital finance is offered by lenders through a number of different solutions. The best working capital facility for SMEs will be dependent on their business circumstances and requirements. For many businesses, a blend of lending solutions is the best route to go – drawing on each working capital facility as and when they are required.

Working Capital SolutionSummaryPro’sCon’s
Unsecured Small Business LoansA unsecured loan issued to the business with no need for collateral. Borrow the principal amount and pay back with interest through fixed installments.Fast, no-hassle process.

Multi-purpose, funds can be used for most business activities.

No security required to secure the loan.

Often capped at around $100,000 (security required for larger amounts).

-Higher interest rates.

Secured Business LoansCan be used as a short-term loan. Borrow a fixed amount but with property/asset used as collateral in the lending process. Repay in fixed installments.Should have lower interest rates than borrowing on an unsecured basis.

Can allow borrowers to access more funding.

Secured. Potential to lose property/asset if unable to keep up with the repayment schedule.

Business Line of CreditPre-approval to a working capital facility, ready to draw on when needed. No need to access all funds at once, access line of credit as many times as needed as long as below the credit line. Similar to a business overdraft.Only pay interest on the funds used.

Passive facility, know the line of credit is there without needing to apply again for finance.

Used as often as required, providing within line of credit limits.

Could have an ongoing maintenance fee, even if not used.

Potential for non-utilisation fees, lenders still like to see capital allocated to customers used appropriately.

Merchant Cash AdvanceBorrow money based on merchant sales volumes (i.e. online or card machine). Repayments automatically deducted from future merchant sales on a daily basis.Repayments are relative to future income. Pay more back as merchant sales are higher and pay less when merchant sales are less.

Can run alongside direct borrowing such as business loans easily.

Can have high interest rates.

Only suitable for businesses with high merchant volumes. Doesn’t take into consideration cash or bank transfer (often used B2B).

Invoice FinanceBorrow money against unpaid invoices and use invoices as collateral to ‘secure’ the finance. Helpful if clients regularly overpay or it’s industry norm to have lengthy payment terms.Organic borrowing. An advance of cash which is already due to the business anyway.

Runs alongside other facilities.

Select certain invoices to be advanced or all receivables.

Usually still obliged to pay the lender if the customer fails to pay.

 

All of these funding options can be provided to borrowers for terms of one year or less, thus making them a suitable working capital finance solution. Read each of our dedicated lending pages to learn more.

 Whilst it can be difficult to attain two term business loans at once (though not impossible) it’s perfectly common to see businesses running multiple working capital facilities alongside the next. A business may take out a business loan for expansion purposes whilst maintaining a line of credit or invoice finance facility to access cash for any  unexpected cash deficiencies that arise, such as replacing equipment or customers paying late. There’s no hard and fast rule for working capital finance and business owners will get to understand what works for them.

When Does it Make Sense to Borrow Through Relatively High Interest Capital Financing

Short-term high-interest working capital finance is not for every business. It’s for  businesses that have a very clear vision of their working capital and what’s ahead in terms of current assets and current liabilities. 

SMEs should only take on a working capital loan if they are certain the amount being borrowed can be repaid. Small businesses borrowing more than they can afford to repay are going to face a very heavy burden in the form of accumulated high-to-begin with loan repayments that could very well choke their cash flows. A business line of credit is one form of working capital financing that sees borrowers only pay interest on the portion of the facility they need to draw. Often used for unforeseen or unexpected expenses.