What Are the Terms of a Working Capital Loan?

Working Capital Loans - 2 Min Read

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At Mulligan Funding, one of the most common questions that our in-house Funding Experts receive is: “what are the terms of a working capital loan?

This is a very important question – arguably, it may be the MOST important question – because knowing exactly what’s involved when taking out any kind of loan is critical. The last thing you want is to stumble over unexpected terms and conditions, and face extra costs and stress.

Before we answer this important question, however, we need to take a step back and highlight that there are generally two kinds of loans that are labeled “working capital loan”. This can cause some confusion and misunderstanding.

The Bank’s Definition of a Working Capital Loan

Many banks (and credit unions) offer funding vehicles that they call “working capital loans”. This is simply another name for a conventional bank loan, and is usually approved only for borrowers who need to meet short-term obligations – such as purchasing inventory, taking care of accounts receivables, and so on.

And like a conventional bank loan, borrowers also need virtually flawless credit, at least 2 years of credit history (though in some cases longer is required), and the loan must be secured by collateral. Payments are made monthly via fixed amounts. There is also often a pre-payment penalty for borrowers who want to end their loan sooner than scheduled.

Mulligan Funding’s Definition of a Working Capital Loan

Here at Mulligan Funding, our working capital loans are ACTUAL working capital loans. That is, they are designed to inject cash into a business to cover expenses, expand and upgrade, exploit profitable opportunities, and so on. There are no restrictions to how the funds can be used, and the loan duration can be short, medium or long-term, depending on each borrower’s unique needs and situation.

Furthermore, borrowers only need a few months of credit history, and imperfect or damaged credit is not a deal-breaker (nor is a past bankruptcy). There is no need for collateral, either. And instead of a large monthly amount, borrowers pay back a portion of their loan via small daily fixed amount. This payment is automatic, which reduces administrative burden. They can also repay their loan ahead of time if they wish, and reduce their overall interest costs.

The Bottom Line 

As you can see, the terms of these two working capital loans are very different!

For banks, there really are no working capital loans – there are just conventional bank loans with a different name, and the terms can be very restrictive. But with us, our working capital loans are legitimate working capital loans – and that’s why our terms are categorically more business and borrower-friendly. We also have very high approval rates, and our 1-page online application takes 10-15 minutes to complete.

Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.