How to qualify for a working capital loan

Working capital is often unsecured or only partly secured, so lenders lean harder on cash flow and credit than they do for equipment. Knowing what they look for helps you ask for the right amount and get an answer faster.

What lenders look at

• Time in business. Many lenders want at least 2 years; some will go lower with strong revenue or collateral.
• Revenue and cash flow. Recent business bank statements show whether deposits can support the payment.
• Credit. Business credit and the owners’ personal credit both matter for most small-business loans.
• Existing debt. Lenders check whether new payments fit alongside what you already owe.
• Use of funds. A clear use tied to revenue, such as a signed contract, reads better than a general request.
• Industry. Some industries are seasonal or cyclical, and lenders adjust terms for that.

Documents to have ready

• The last 3 to 6 months of business bank statements.
• A government-issued ID for each owner.
• For larger requests: the last 2 years of business tax returns, a year-to-date profit and loss statement and balance sheet.
• A debt schedule listing current loans, leases and lines, with balances and payments.
• If the money is for a specific job or purchase: the contract, purchase order or quote.
• An accounts receivable aging report, if you are borrowing to bridge slow-paying customers.

How lenders read bank statements

Underwriters look at average monthly deposits, the lowest balances each month, the number of overdrafts or returned items, and any recurring payments to other lenders. Large one-off deposits, such as a loan or an owner injection, are usually set aside. Steady deposits and balances that rarely approach zero make a request easier to approve.

How much to ask for

Ask for what the need actually requires, with a sensible cushion. Lenders size working capital to cash flow, so a request far above what deposits can support is more likely to be cut or declined. Show the math: the contract value, the costs before you get paid, and when the money comes back.

If you are also buying equipment, put both on one application. The equipment gives the lender collateral, and a single review of the whole project often makes the request stronger than two separate ones.

Ways to strengthen an application

• Keep business and personal accounts separate.
• Avoid overdrafts and returned items in the months before you apply.
• Explain one-off dips in revenue up front, with a sentence or two of context.
• Pair the request with collateral, such as the equipment you are financing.
• Pay down revolving balances before you apply, if you can.
• Make sure your business filings, licenses and tax payments are current.

Watch for red flags

Be wary of anyone who promises approval before reviewing your file, quotes only a factor rate or daily rate, or says there is no personal guarantee when the contract says otherwise. Ask for the APR, the total cost and the amount you will actually receive after fees, in writing, before you sign anything.

Ready to start? LenderCloud reviews equipment and working capital together on one application. All financing is subject to credit approval and documentation.