Working Capital Loan
Updated August 22, 2022

How a Small Business Can Get a Working Capital Loan

Business Taxes

Securing a working capital loan is a vital part of any small business enterprise.

The right working capital loan can catapult a small business 5 years into the future.

Regardless of how well thought out or strategic a business enterprise may be, working capital is needed for the day to day operations.

Working capital is what enables businesses to function, and without it, they simply could not operate.

Lack of liquidity is a primary cause of business default across all sectors.

And it always helps to have extra cash at hand in case of unforeseen expenses which inevitably arise.

Lines of credit (LOC) are similar to working capital loans in the sense that they are used for daily financing on a small scale.

However, they are structured differently, with different terms and conditions than pure working capital loans.

Securing a working capital loan is vital to any small business enterprise. #workingcapitalloan #smallbusinessloansWhat is a Small Business Working Capital Loan?

Specifically, a working capital loan is a loan taken out for the purposes of the day to day running of a business.

This includes the inventory, wages, electricity, internet, and other general expenses.

It does not include long-term assets or expensive infrastructure such as machinery or premises.

A different kind of loan is required to finance these types of asset.

A working capital loan is especially important when it comes to seasonal businesses which have periods of high activity followed by periods of low business.

The working capital loan can pay for everyday expenses in the low season and the business can take in increased profits in the high season.

Benefits of a Working Capital Loan

The obvious advantage of a small business working capital loan is that it is easy to acquire in comparison to other loans, and it also serves as a form of financing for every day expenses.

It is a form of debt financing, meaning no equity transaction is needed.

The business owner remains in full control of his or her company.

Working capital loans can be either secured or unsecured.

An unsecured loan is one where no collateral is needed to attain the loan.

Generally, most working capital loans require collateral as secured loans.

Only businesses who have a very high credit rating are able to attain an unsecured working capital loan.

Drawbacks to a Working Capital Loan

A small business working capital loan does have a series of disadvantages, though it is still essential for the majority of small businesses which require access to this kind of finance.

One prominent disadvantage is that a working capital loan is most often tied to the credit score of the borrower, so any missed payments or defaults could destroy a credit rating.

Interest rates of working capital loans can often be quite high to compensate the lender for the risk involved.

While easy to acquire, the rates can be steep, though this will often depend on the creditworthiness of the applicant.

Most will also require collateral for the application to succeed.

How to Get a Small Business Working Capital Loan with Torro

There are a number of ways to get a small business working capital loan.

One of the most reputable lenders in the market right now is Torro.

They offer a wide selection of financial options for small, medium, and large businesses.

They also offer working capital loans to small startups.

Torro is not actually a lender, but it is a lending marketplace which can connect small businesses, startups, and individuals to the appropriate loan provider.

Torro has a unique approach to lending and do not settle for a one size fits all approach.

Each application is evaluated on the merit of its strengths on an individual basis and an emphasis is placed on human relationships and customer support as opposed to dry algorithmic evaluation, with an emphasis solely on creditworthiness.

To get a working capital loan with Torro, you will need to access the website, select the appropriate type of loan you are looking for, and supply the necessary documentation.

The funding can typically be in your bank account within 48 hours.

Torro provides two basic loan options for startup ventures.

The first is a documented venture with a proper business plan, financials and market research.

The second is an idea based venture with little documentation or strategy.

Instead of simply denying the application of the second type of loan, Torro provides an alternative investment strategy.

Note that the idea based venture will be subject to more stringent and specific terms and conditions in many instances.

But Torro is willing to assess the loan on its merits and provide fair terms and conditions, unlike larger institutions who will simply deny the application straight away.

Torro also provides small business loans for existing businesses, which are categorized as businesses that have been in operation for one year or longer.

Again, approval times are fast, and the documentation and verification required is only that which is absolutely necessary for the purposes of loan approval.

Loans range from $10,000 – $500,000 with varying terms and interest rates.

Why Torro?

Getting a working capital loan with a large institution can often be a headache.

They often require reams of paperwork, verification, back and forth, lengthy procedures, and strict evaluation models.

So after a long wait, your application for a working capital loan can be denied, even for a small amount.

This is one of the drawbacks of over-regulation and systematic processes.

What’s more, is that the level of documentation and personal information required is incredibly invasive.

Customers are becoming more conscious of the importance of data in the digital era, and the fact that most centralized systems have far too much information that has not been given with the appropriate consent.

The recent Cambridge Analytica, Equifax, and NSA scandals are evidence of this.

By contrast, Torro has a more humane and interactive approach that aims to give small businesses and startups the finance they need to move forward.

Many of the loan options do not require much paperwork, business appraisal, or asset verification.

Small businesses will submit some basic and essential information, and get the application swiftly approved.

It only takes a couple of minutes to answer a few simple questions, and then the application goes for review.

Once reviewed by one of the agents, the funds can be in the account within 48 hours, and often within 24.

Another reason to choose Torro is that they are recognized by the Better Business Bureau (BBB).

The BBB have been in operation since 1912, and the organization is dedicated to the verification of trustworthy businesses.

If a business is listed with the BBB, it is certainly legitimate and has a long history of satisfied customers.

The BBB is supported by over 400,000 businesses in the USA and is not affiliated with any governmental agency.

Businesses that adhere to the BBB code of conduct and are successfully vetted by the independent organization are free to use the BBB trademark.

Customer Reviews

Aside from the BBB trademark accreditation, Torro has outstanding customers reviews on a variety of different rating platforms.

Torro has a rating of 5 stars (excellent), on Trust Pilot, a premier online rating service.

Here are some of the latest reviews

Elwyn Ewald June 29th, 2017 – “Very professional treatment by all the folks at TORRO with particular hats off to an extremely talented and well informed person named TRISTAN BURTOFT who supplied me with helpful alternative ideas for how I could get the loans for my businesses who went out of his way in an honest effort to help me reach our mutual goals in talking together”

Russ Harr June 18th, 2018 – “Eric Christensen has been very professional and helpful in processing my request.

 I will recommend him as a Representative of Torro Funding to any other professional that might need his services.

Thank you”

Jose June 15th, 2018 – The personnel at Torro made the application process very simple.

They explained everything every step of the way and assisted me in obtaining the best lines of credit for my needs.

I would highly recommend Torro to anyone looking for financing whether it be a loan or lines of credit. A complete thumbs up and 5 stars to this company and its personnel”

How to Qualify for a Small Business Loan

In order to qualify for a small business loan, you will typically need to understand how the loan system works.

The most fundamental metric in terms of acquiring a small business working capital loan is the credit score.

This is a score given by independent rating agencies based on a number of individual components.

The most important components of a good credit score are payment history, debt burden, and length of credit history.

FICO is one of the most common credit rating systems, ranging from 350 to 800.

Generally, a score below 500 is bad, while a score above 650 is good.

If you have a bad credit score, there are no quick and easy ways to build it up.

A good credit rating must be increased slowly, over time, much like all things.

What you can do is obtain a free credit report and check it for errors.

This happens more often than is commonly thought.

According to a 2012 study commissioned by the Federal Trade Commission (FTC), 25% of consumers identified damaging credit errors on their reports that could potentially affect credit scores.

A 75% success rate for such a critical number is awful.

On the other hand, 80% of those who actually filed a dispute with regard to the error were able to get the error rectified.

So it is very important to download the report and verify that there are no errors.

After you know your credit score, you must get informed on the requirements of the lender as well as specific details on the loan itself.

If you have a good business plan, all the relevant documents, and a good credit score, there is nothing stopping you from acquiring a working capital loan from an institution.

Even if you don’t have these, Torro can most likely provide you with an appropriate financial solution.

There is little more frustrating than gathering and filling out all the necessary documentation, sending it to a lending institution, and having the application denied after a three-week wait.

Other Types of Working Capital Loans

There are other types of small business loans available than working capital.

A working capital line of credit serves much the same function as a working capital loan, used for everyday business needs.

It is especially useful for small businesses as it is used as needed.

Successful applicants are given access to a pool of funds that can be used as necessary.

Another option is the merchant cash advance (MCA).

A sum of cash is advanced to the borrower, and the loan is repaid through a fixed percentage of debit card sales.

While this is one of the best types of working capital loans, it is typically the most expensive.

An SBA 7(a) is traditionally the loan of choice for small businesses based in the USA.

Unfortunately, the requirements to obtain an SBA7(a) loan have gotten stricter.

It takes a very long time and no small amount of documentation.

These loans are only distributed through larger institutions, and SBA 7(a) loans are partially guaranteed by the American government.

Invoice financing is suitable for businesses who typically have customers who pay late on their invoices.

It enables such businesses to get immediate payment on these invoices which can easily free up cash for day to day operations.

Working Capital Loans for Small Business Owners

There are many types of financial options available to businesses seeking working capital loans.

Working capital loans for small business owners are not that difficult to acquire, thanks to alternative financing options.

However, many businesses need the cash sooner rather than later.

And applying for a traditional loan, such as an SBA 7(a), can be immensely time consuming and laborious.

This is why a lender such as Torro can be a viable alternative.

Loans are delivered within 24-48 hours and the documentation required is minimal.

For people who simply need cash quickly to proceed to run their business venture without interruptions, Torro is the perfect solution.



Logan Allec, CPA

Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.

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