Working capital is the money you use to keep the business running from day to day. Working-capital finance is not one particular product. It can include a loan, revolving credit, invoice finance or another arrangement. Start with how much you need, how long you need it for and how your business will make the repayments.
What do you need to pay for?
You may need extra working capital because wages or suppliers are due before customers pay, because trading is seasonal or because you need to buy stock. A short-term gap with a clear end date is very different from running short every month.
If there is a specific and urgent timing mismatch, start with the cash-flow gap guide. It includes immediate non-borrowing actions and warning signs that the problem may need a different response. If the money is specifically for inventory, use the stock and inventory guide. For a Corporation Tax or VAT deadline, start with the tax-bill guide, which also explains why you should contact HMRC promptly.
Compare working-capital routes
The British Business Bank describes several common routes. This table explains the main differences; it does not mean that Mills Commercial Finance can offer every option.
| Route | Funding pattern | Repayment or collection | Main trade-off to investigate |
|---|---|---|---|
| Working-capital or term loan | A set amount for a specific purpose | Scheduled payments | Fixed commitment can reduce flexibility if trading weakens |
| Overdraft or revolving credit | Draw and repay within an agreed limit | Charges linked to use and facility terms | Limits, review dates, pricing changes and withdrawal conditions |
| Invoice finance | Eligible business-to-business receivables | Linked to invoices and customer receipts | Eligibility, recourse, assignment, service model and fees |
| Purchase-order finance | Qualifying confirmed orders and supplier costs | Structured around the order and resulting customer payment | Order, supplier, customer and margin eligibility |
| Merchant cash advance | Businesses with an established pattern of eligible card sales | Collections commonly vary with card takings | Total cost and the effect of collections on daily cash |
| Asset refinance | Release value from suitable assets your company owns | Payments under a secured facility | Valuation, existing security, ownership and risk to the asset |
Choose by how cash moves through your business
- Work out the most you are likely to need and when you will need it.
- Decide whether this is a one-off timing gap or a continuing shortfall.
- Gather useful evidence, such as invoices, card sales, orders or asset details.
- Check whether you could still repay after a weaker-than-expected month.
- Compare the total cost, payment frequency, security and flexibility.
What might you need to provide?
Depending on the route, you may be asked for bank statements, filed accounts or current management figures, a cash-flow forecast and details of existing borrowing. Invoice lists, card-sales records, purchase orders or asset details may also be relevant. Requirements and eligibility vary between lenders.
Working-capital finance or a broader business loan?
Working-capital finance is generally used for short-term running costs and timing gaps. “Business loan” is a broader category and can also cover longer-term investment or a specific purchase. See the business-loan comparison if the money is not mainly for day-to-day operations.
Frequently asked questions
Is working-capital finance always a loan?
No. The term covers several structures, including loans, revolving facilities and finance linked to receivables, orders, card sales or suitable assets.
What can working-capital finance be used for?
It is commonly used for wages, suppliers, stock and short timing gaps. What you can use it for will depend on the lender and the agreement.
How should routes be compared?
Compare the total cost, how and when money will be collected, the length of the agreement, flexibility, security, guarantees and what happens to your cash flow during a weaker month.