A working capital loan is used to finance the everyday operations of a business such as sales and marketing, product development, wages and other activities.
KEY TAKEAWAYS
A working capital loan is a loan taken to finance a company's everyday operations.
Working capital loans are not used to buy long-term assets or investments; they are used to provide working capital to covers a company's short-term operational needs.
Companies with high seasonality or cyclical sales may rely on working capital loans to help with periods of reduced business activity.
Working capital loans are often tied to a business owner's personal credit, so missed payments or defaults may hurt their credit score.
