Working capital is the cash a business uses to cover day-to-day operations — payroll, rent, inventory, and supplies — between the time money goes out and the time customers pay. When that gap widens because you are growing, waiting on invoices, or ramping for a season, you need operating capital to bridge it. This guide covers your main options, how they differ, and how to choose.
What counts as working capital
Working capital is simply current assets minus current liabilities — the money available to run the business right now. A profitable company can still be short on working capital if its cash is tied up in inventory or unpaid invoices. That is a timing problem, and it is the most common reason owners seek operating capital.
Your main options
A business term loan gives a fixed lump sum repaid on a set schedule. Through our funder partners, term loans run from $50,000 to $1,000,000+ over 2 to 10 years, secured or unsecured, with decisions in as little as 24 hours for eligible applicants; bank and SBA term loans usually take far longer. A business line of credit offers flexible, reusable access to funds and suits recurring gaps, but it can be harder to qualify for. An SBA loan offers low rates but lengthy paperwork and approval times.
Revenue-based funding (a merchant cash advance) is a different kind of product. It is a purchase of future receivables: you receive a lump sum against your future sales and remit a share of revenue until it is repaid. It is approved on deposits rather than credit and is usually the fastest option.
Working capital financing vs. a term loan
The two solve different problems. A term loan fits a planned, longer-lived investment — equipment, a buildout, a second location — repaid over years. Working capital financing covers short-term operating needs like payroll, inventory, or a seasonal gap, and is meant to be repaid as that gap closes. Using a long-term loan for a short-term gap, or short-term capital for a long-term asset, mismatches the cost to the purpose: you either pay for money you no longer need or squeeze a multi-year investment into a few months of payments.
A line of credit vs. a lump sum
A line of credit is revolving: you are approved for a limit, draw only what you need, pay only on what you use, and the limit refreshes as you repay. That makes it well suited to recurring or unpredictable gaps. The trade-off is that lines can be harder to qualify for and can be reduced or pulled by the lender. A lump sum — a term loan or a revenue-based advance — delivers all the capital at once, which is better when you know the amount and need it now for a specific use.
When speed and approval matter most
If you have steady revenue but a bank has declined you — or you simply cannot wait weeks — revenue-based funding is built for that. Approval weighs the deposits flowing through your business rather than your credit score or collateral, so a revenue-positive business can be evaluated quickly. Eligible applications can get a same-day decision with funding commonly within 24 to 72 hours. Not all applicants qualify.
The bottom line: match the tool to the need. Use a term loan for a planned investment with a multi-year payback, a line of credit for recurring gaps, and revenue-based funding when speed and revenue-based approval matter most. Y Millennial Funding is a direct funder of revenue-based funding for businesses doing $50,000 or more in monthly revenue, and offers business term loans through funder partners. Not all applicants qualify.