Working Capital and Revenue-Based Funding
Revenue-based working capital, often called a merchant cash advance, is a purchase of a portion of your future receivables in exchange for funds now.
It typically fits established businesses with steady monthly deposits that need capital quickly and may not qualify for a bank loan. Costs are usually higher than traditional loans, so it works best for short-term needs with a clear return.
Working Capital quick facts
These are the typical terms for working capital. Your actual terms depend on underwriting.
| Typical amount | $5,000 to $500,000 |
|---|---|
| Typical term | 3 to 18 months |
| Typical funding speed | As little as 24 to 72 hours after approval |
| Typical minimum requirements | 6+ months in business, $15,000+ monthly revenue, 550+ credit |
| Cost structure | Factor rate, typically 1.15 to 1.50 |
Working Capital: good fit or not?
This option works well for some situations and is a poor match for others.
Good fit
- Businesses with consistent card or bank deposits
- Short-term needs such as inventory, payroll gaps, or a time-sensitive opportunity
- Owners who need a decision faster than a bank can provide
- Credit profiles that do not fit traditional lending
Not a good fit
- Long-term projects or real estate purchases
- Businesses with declining or highly irregular revenue
- Owners who need the lowest possible cost of capital
- Businesses already carrying multiple advances
Documents usually needed
Having these ready typically speeds up review. A funder may request additional items.
- Completed one-page application
- Most recent 3 to 6 months of business bank statements
- Driver license for each owner
- Voided business check
- Recent processing statements, if you accept cards
Working Capital: how it works
The process typically follows 4 steps from first conversation to funding.
Share your basics
Send a short application and recent bank statements.
Review offers
We present available offers with the amount, factor rate, total payback, and payment schedule.
Verify and sign
The funder confirms details and sends a contract for review.
Receive funds
Funds are typically deposited after final verification.
Working Capital vs. Business Line of Credit
The main difference comes down to structure, cost, and timing. Here is how they typically compare.
| Feature | Working Capital | Business Line of Credit |
|---|---|---|
| How it works | Lump sum, repaid from future receivables | Revolving limit, draw as needed |
| Cost structure | Fixed factor rate on the amount funded | Interest or fee only on what you draw |
| Payments | Daily or weekly, fixed or percentage of sales | Weekly or monthly on the outstanding balance |
| Typical speed | 1 to 3 business days | 2 to 7 business days |
| Credit flexibility | Higher | Moderate |
Typical characteristics. Terms vary by funder and file.
Working Capital FAQs
Is a merchant cash advance a loan?
A traditional merchant cash advance is structured as a purchase of future receivables, not a loan. Some revenue-based products are structured as short-term loans instead. Your contract will state which structure applies.
How is the cost of working capital calculated?
Most revenue-based funding uses a factor rate. You multiply the amount funded by the factor rate to get the total payback. For example, $50,000 at a 1.30 factor rate means $65,000 is repaid.
What is a holdback?
A holdback is the percentage of daily or weekly receivables remitted to the funder until the advance is repaid. Some products use a fixed daily or weekly payment instead.
Can I qualify with bad credit?
Revenue-based funders typically weigh recent deposits more heavily than credit score. Lower credit may still qualify, but it usually affects the amount and cost. Approval depends on underwriting.
Can I pay it off early?
Some funders offer an early payoff discount and some do not. We will point out early payoff terms when we review offers with you.
Will a UCC filing be placed on my business?
Most revenue-based funders file a UCC-1 financing statement to record their interest in your receivables. It is typically released once the balance is paid.