Working Capital Loan

A working capital loan is best used to fund short-term, daily operational expenses such as payroll and purchasing materials. Working capital is the difference between a company's current assets and current liabilities. Current assets are assets such as accounts receivable, inventory, and other short-term holdings that can be turned into cash within one year. Current liabilities are liabilities such as short-term debt and other typical operational expenses that will be payed within one year. Working capital loans are short-term loans meant to satisfy immediate cash flow and business needs. Thus, these loans are not optimal for long-term costs, investments, or growth due to their short repayment terms.