"Working capital loan" describes a use of funds, not a specific loan structure. Owners who go shopping for one find a confusing menu of products: short-term term loans, lines of credit, MCAs, RBF, invoice financing, and SBA 7(a). Each is sometimes marketed as a "working capital loan" and each has very different cost and structural implications.
Short-term term loans
Many non-bank lenders offer short-term loans (3–24 month terms) marketed as working capital loans. Repayment is usually daily or weekly via ACH. They close fast and don't require collateral, but factor rates and APR-equivalents vary widely. Always compute the APR-equivalent — the headline payment is rarely a useful comparison.
Lines of credit
A revolving line is the structurally cleanest fit for ongoing working-capital needs because the borrower only pays interest on what's drawn. Banks, credit unions, and several non-bank lenders offer business lines.
SBA 7(a) for working capital
An SBA 7(a) can fund working capital up to a 10-year term, which makes the monthly payment dramatically lower than a 12-month non-bank loan of similar size. Tradeoff: longer time-to-close and more documentation. Typically the lowest-cost structure when the borrower can wait.
Choosing among them
Match the structure to the cash-flow pattern. Predictable, ongoing need with steady revenue → line of credit or SBA 7(a). One-time defined need with a clear payback source → short-term term loan. Receivables-driven need → invoice financing/factoring. Avoid using a high-cost short-term product to fund recurring expenses; the math compounds painfully.
Sources
Editorial note: This article is general information about how small-business lending products work. It is not financial, legal, or tax advice for any specific borrower. Loan terms, eligibility, and rates vary by lender, borrower profile, and current market conditions, and the specific facts of your business will determine which products and structures actually fit. Consult a CPA, attorney, or SBA-approved lender before making decisions that affect your business.