Quick answer
A working capital loan funds the everyday costs of running a business — wages, stock, rent, supplier bills and marketing — when cash coming in lags behind cash going out. It's usually a short-to-medium term loan, often unsecured for trading businesses and sized on turnover and bank statements. It suits growing businesses whose costs arrive before the revenue they create.
Key points
- Pays for running costs, not long-life assets.
- Often unsecured, typically $5k to $500k, sized on trading.
- Most useful when growth means costs arrive before revenue.
- Term should roughly match how long it takes the spending to pay back.
- Typical amounts
- $5k – $500k unsecured
- Used for
- Wages, stock, rent, suppliers
- Term
- Short to medium
Growth is wonderful, and also slightly cruel. Win a big new client and you’ll need extra staff, materials and maybe a second vehicle now, while the money from that client trickles in over the next few months. Working capital loans exist for that awkward middle bit — the stretch where the business is doing well on paper and feeling squeezed in the bank account.
What is a working capital loan?
It’s finance used to cover the day-to-day running costs of a business rather than to buy a long-life asset. Think wages, rent, stock, supplier invoices, insurance premiums, marketing and the general hum of operating. Most are term loans with a fixed amount and repayment schedule; some lenders offer them as revolving facilities.
For trading businesses, working capital loans are commonly unsecured and sized on turnover and bank statements, typically in the $5k to $500k range. Where more is needed, or trading history is short, property security can support a larger amount.
When does a business need working capital finance?
- Growth spurts — new contracts, new locations or new product lines that need staff and stock before they pay.
- Long payment terms — customers who pay in 30, 60 or 90 days while your costs are weekly.
- Supplier opportunities — bulk discounts or early-payment terms that save money if you can pay up front.
- Lumpy projects — trades and agencies with big jobs and staged payments.
- Recovering from a disruption — weather, a lost client or a supplier failure that knocked cash flow sideways.
How does a working capital loan work, step by step?
- Enquire with the amount, the reason and a sense of when the extra revenue will arrive. No credit check at this stage.
- Trading review. Bank statements, and sometimes BAS or accounts, show the lender your income pattern and existing commitments.
- Sizing and term. The lender sizes the loan on turnover and sets a term — ideally matching how long the growth takes to pay back.
- Offer. You’ll see the amount, term, repayment frequency, fees and any guarantee requirements.
- Funding. Money lands in your business account to deploy across wages, stock and bills.
- Repayment. Regular repayments from trading, with the option to pay early on many products.
What are the pros and cons?
| Pros | Cons |
|---|---|
| Covers the costs that actually keep the doors open | Not designed for buying equipment or property |
| Often available without property for trading businesses | Repayments begin quickly, before growth fully lands |
| Lets you say yes to bigger work | Borrowing to plug a permanent loss only delays the problem |
| Can be set up faster than most secured lending | Shorter terms mean larger regular repayments |
| One clear lump sum and repayment plan | Usually needs a personal guarantee |
How much working capital should you borrow?
A simple way to size it:
- List the extra monthly costs the growth will create — wages, materials, rent, vehicle running.
- Estimate how many months until the new revenue covers those costs.
- Multiply, then add a buffer for things taking longer than planned.
- Subtract any cash you can comfortably use without leaving the business exposed.
That’s your working capital gap. The cash-flow gap estimator does a version of this for you, and our guide to costing your growth plan walks through it with illustrative figures. Prefer to have a person look at the numbers with you? Send them through.
What does it look like in practice? (illustrative)
A Perth commercial cleaning company wins a contract to service three new office buildings. It needs eight more cleaners, a second van and a big order of supplies, and the client pays monthly in arrears. For roughly the first two months, wages and supplies go out before a single invoice is paid.
A working capital loan covers those first months of extra wages and supplies. The van is funded separately with vehicle finance, because it’ll earn for years, not months. By month four, the new contract is paying for itself and the loan repayments come comfortably out of the extra revenue. Illustrative only — real terms depend on assessment.
What are the warning signs you’re borrowing for the wrong reason?
Working capital finance is brilliant for timing gaps and growth. It’s not a fix for a business that’s losing money on every sale. Before borrowing, check that your prices cover your costs, that the slow-paying customers will actually pay, and that the growth you’re funding is profitable. If the gap keeps getting bigger month after month, the answer may be pricing, costs or terms rather than a loan.
What documents will you need?
- Photo ID for each director or owner
- ABN or ACN details
- Recent business bank statements
- For larger amounts: BAS, financial statements, aged debtors and creditors lists
- Evidence of the growth — a signed contract, purchase orders or a forecast
What are the alternatives?
- Business line of credit — better if the need goes up and down rather than a single growth phase.
- Invoice finance — if the gap is caused by business customers paying slowly.
- Stock finance — when most of the money is going into inventory.
- Unsecured business loan — similar product, often used interchangeably.
- Property-backed loan — for larger amounts or shorter trading histories.
Could working capital finance power your next growth step?
If the business has more opportunity than cash, that’s a good problem — and a fixable one. We’ll look at your trading, the size of the gap and the timing of the payback, then tell you whether a working capital loan is the right fit or whether something else would work better.
It’s safe to ask. There’s no credit check when you enquire, your details aren’t handed around a room full of lenders, and a lending specialist — a real one — reads your form and calls you. Please be accurate about turnover, trading time and what the money will do. See if you qualify.
Frequently asked questions
What counts as working capital?
In accounting terms it's current assets (cash, stock, money owed to you) minus current liabilities (bills and debts due within a year). In everyday terms, it's the money a business needs to keep operating between paying costs and getting paid.
Is a working capital loan the same as a line of credit?
Not quite. A working capital loan is usually a lump sum repaid over a fixed term. A line of credit is a revolving limit. Both fund day-to-day costs; the line of credit suits ups and downs, the loan suits a defined growth phase.
Can I use a working capital loan to pay staff?
Yes. Covering wages while a new contract ramps up, or through a growth phase, is one of the most common uses.
How quickly do I need to repay a working capital loan?
Terms vary, but they're generally shorter than equipment or property loans — often months to a few years. Aim for a term that matches how long it takes the extra activity to generate cash.