For Porters Bar, a family-run neighborhood spot, the summertime off-season meant slow months and ongoing bills. “We’d end up going into debt, and paying it back would take all season, so we couldn’t build up a pile of savings,” says owner Scott Nogueira.

After several traditional lenders, including his bank of 17 years, turned down his request for small business financing, Scott turned to Lendio. According to Scott, the loan he received “totally saved my business.” With access to the financing they needed, Porters Bar was positioned for growth, setting the stage to surpass $1 million in annual revenue.

Stories like this are familiar to many business owners. Finding reliable, affordable funding for everyday expenses is often one of the toughest parts of running a business. An SBA working capital loan may help bridge the gap between income and expenses, giving you room to manage daily operations without losing focus on your long-term goals.

Working capital loans support daily business operations.

The term “working capital” refers to the funds businesses use to cover operational expenses. This often includes items such as payroll, inventory, rent, utilities, and payments to suppliers.

Unlike long-term financing, which is often used for investments such as equipment or expansion projects, working capital loans typically have short- to medium-term repayment periods. They are designed to bridge the gap between costs and revenue, helping to keep businesses running smoothly from week to week.

SBA working capital loans are backed by the U.S. Small Business Administration. This lowers the risk for lenders, often resulting in lower interest rates, longer repayment terms, and higher approval rates when compared with traditional loans. The SBA guarantee may also improve approval odds for businesses that do not qualify for financing through conventional channels.

Choose the right SBA loan program for your working capital needs.

While there are several different types of SBA loans, only a few are well-suited for working capital needs. The right option depends on several factors, such as how quickly you need the funds, the amount of capital needed, and whether you have one-time or ongoing needs. Here are a few programs to consider.

SBA 7(a) Loans

The SBA 7(a) loan is the most flexible option and is also the most commonly used. Funds may be used for a wide range of purposes, including working capital, inventory purchases, and refinancing certain types of debt.

Loans are available for amounts ranging from $350,000 to $5 million, and when used for working capital, repayment terms can extend for up to 10 years. While rates are negotiated between the borrower and the lender, they must fall within SBA guidelines and are typically lower than conventional loan rates.

SBA Express Loans

SBA Express loans offer faster turnaround times, with decisions typically made within 36 to 48 hours. These loans are designed for smaller, time-sensitive needs.

Loan amounts cap at $500,000, with repayment terms similar to the standard 7(a). Interest rates may be slightly higher, but the application process is more streamlined, with fewer documentation requirements.

SBA CAPLines (Lines of Credit)

The SBA CAPLines program offers four specialized lines of credit for small business owners. The first three are suited specifically for seasonal, contract, and construction businesses, while the fourth is a general-purpose line of credit for day-to-day business operations.

Unlike loans, lines of credit allow you to draw funds only when needed, up to a maximum approved balance. Due to the added flexibility, CAPLines may have slightly higher interest rates when compared to other types of SBA loans.

Common uses for SBA working capital loans.

When incoming revenue can’t keep up with expenses, many business owners turn to a working capital loan to help cover critical costs and avoid disruptions. Common uses include:

  • Payroll: Ensuring employees are paid on time and keeping the business fully staffed, even during slower periods.
  • Vendor payments: Covering the costs of necessary inventory and avoiding late payments, protecting supply chains and vendor relationships.
  • Marketing and promotions: Funding short-term campaigns to boost visibility and drive sales, particularly during the off-season.
  • Fixed operating expenses: Managing rent, utilities, and other fixed costs that continue regardless of business cycles.
  • Covering accounts receivable gaps: Smoothing over delays in payment or billing cycles that create cash flow disruptions.

While these are some of the most frequent uses, you can use working capital loans to address nearly any operational expenses that affect your daily cash flow.

Unique advantages of SBA working capital loans.

Government backing gives SBA working capital loans several advantages that traditional financing typically can’t match. They often come with lower interest rates and longer repayment periods, giving you more time to stabilize monthly cash flow without the added pressure of aggressive payment schedules. You'll also have the flexibility to use the proceeds for virtually any operating expense, making them well-suited to a range of industries and needs.

SBA loan programs are designed to improve access to funding for underserved groups, such as minorities, women, and veterans. This may result in greater access to cash flow solutions, even for those who were previously denied a loan with a conventional lender.

Eligibility criteria for SBA working capital loans.

To qualify for an SBA working capital loan, you must own a for-profit business based in the United States. The business must also meet the SBA’s size standards, which typically include having fewer than 500 employees.

While there’s no universal SBA loan credit score requirement, most lenders prefer businesses with strong credit. However, SBA Express Loans and CAPLines may allow for slightly lower scores. Generally, lenders prefer applicants with at least one to two years in business, though startups with strong business plans or secured contracts may also be able to secure funding.

It’s critical to show consistent revenue and demonstrate an ability to repay the loan. One way lenders evaluate this is through your current ratio, which measures whether your current assets are sufficient to cover your current liabilities. It's calculated by dividing current assets by current liabilities, with a ratio above 1.0 generally being considered a sign of good short-term financial health. In some cases, SBA loan approval may require you to make a personal guarantee or put up collateral, especially for higher loan amounts.

How to successfully apply for an SBA working capital loan.  

A bit of preparation can go a long way toward strengthening your SBA loan application and expediting the approval process. Start by organizing your financial documents, including:

  • Recent personal and business tax returns
  • Profit and loss statements
  • Balance sheets

Be prepared to clearly explain how you'll use the funds and how they'll benefit your operations or support growth. Vague requests can raise red flags, while detailed, thoughtful plans increase lender confidence.

Keep in mind that transparency builds trust. If your business has experienced revenue dips or faces seasonal challenges, explain these patterns and present a realistic recovery plan. Lenders appreciate honesty and want to see that you understand your business cycles.

Finally, explore multiple lenders before committing to a loan offer. Each lender may take a different approach to evaluating your application based on their specific criteria. Applying for an SBA working capital loan through a marketplace like Lendio may increase your chances of finding the right lender and loan terms for your needs. Check your eligibility today.