A Working Capital Loan is a hybrid product between a Merchant Advance and an Expansion Loan. It is an uncollateralized product paid back plus fixed simple interest. There is no interest rate and although there are fixed payments, the term is only an estimate based on a business’ projected gross revenue.

HOW DO THEY WORK?

Expansion Loans function just like traditional term loans, except you won't secure them through your local bank. In some cases, you'll have to provide collateral to back an Expansion Loan. You receive an agreed upon dollar amount at a fixed interest rate, that you pay back over a set period of time in regular intervals.


Working Capital Loans generally have a higher cost and a shorter term with more frequent payments because there is no collateral and usually no profitability analysis. They do not fully amortize because simple interest is just a cents-on-the-dollar payback, so Working Capital Loans are structured for quicker turnaround and therefore normally do not make sense to pay off early.

WHAT DO THEY COST?

Expansion Loans generally have a lower cost and a longer term with wider payment intervals because they are generally meant for larger-scale purposes. Expansion Loans fully amortize with both principal and interest payments like traditional term loans. This means you will only be responsible for accrued interest and can save considerably by paying it off early!


WORKING CAPITAL LOANS - FOR SHORT TERM PROJECTS GENERATING IMMEDIATE PROFITS LIKE:

  • Marketing Campaigns And Advertising

  • Storefront Renovations

  • Seasonal Hiring

  • Bulk Inventory Purchases

WHEN WOULD THEY MAKE SENSE?

EXPANSION LOANS - FOR LONG TERM PROJECTS GENERATING DELAYED RETURN ON INVESTMENT LIKE:

  • Physical Expansion Or Additional Locations

  • Equipment Financing

  • Product Development

  • Debt Consolidation


The vast majority of small businesses can meet the minimum requirements for a Working Capital Loan because of their considerably more lenient approval criteria, which is holistically based on time in business, industry, cash flow and more, instead of just on credit. You can secure this type of loan by just providing your business bank statements.

WILL I QUALIFY?

Expansion Loans have the most stringent approval criteria. The typical borrower has great personal credit, low debt-to-income ratio and an established, profitable business to meet periodic payments regardless of changes in revenue during the normally longer term. You'll need to provide both business and personal financial statements as well.