A working capital loan is a type of loan specifically designed to finance the everyday operations of a business. It provides funds to cover short-term operational needs such as payroll, inventory restocking, rent, utility bills, and other expenses that occur during the normal course of business.
Unlike traditional term loans, which are often used for specific purposes like purchasing equipment or expanding operations, working capital loans are more flexible and can be used for various ongoing expenses to keep the business running smoothly. These loans typically have shorter terms and are repaid over a period of months rather than years. They are commonly used by businesses to manage cash flow fluctuations and ensure that they have enough liquidity to support their day-to-day operations.