Skip links
Two loan agents processing an application

An introduction to a working capital loan

With many kinds of loans available to business owners, finding the right lender and loan can determine the right outcome. Traditional financial institutions offer working capital loans to business owners to meet their needs. However, since not all entrepreneurs can meet their requirements, understanding the other options available to obtain a working capital loan is essential

Understanding working capital loans in Canada

You can find different types of business loans, and working capital loans are one of the more common ones. A working capital loan can be smaller loan amount, making it a source of quick funding that needs to be repaid within 12 months or 24 months, depending on the lender.  

If you and your business have a good credit score, you may be able to get an unsecured loan. In some cases, a capital loan is secured by the business’ assets, which leads to better interest rates, but your credit score and other bank statements may still be required.  

Alternatively, if you own your home but have a less-than-ideal credit score and little financial history, you can access your property’s equity as a lump sum. Since you can use home equity loans for your business, you can get them from alternative lenders.

A mortgage agent interviewing a couple.

How does working capital financing work? 

Normally, the loans are used for daily business operations rather than long-term investments rather than for buying business assets.  

Using a home equity loan as working capital financing gives you usage flexibility, which means you can deploy the funds into any part of your business including as working capital. Instead of assessing your personal credit history or the business’ financial standing, your eligibility for a home equity loan depends on how much equity you have in your property.  

If you have at least 25% equity, you could secure a high-value loan with your property that can you then use for your working capital and other business investments. 

How to calculate working capital 

The formula to determine your working capital is simple. Subtract your current liabilities from your current assets, and you have calculated how much working capital you have.  

The result will either be positive or negative working capital. If you have positive working capital, your business will have enough money for its financial obligations, but negative means you will need more funding.   

Current assets – current liabilities = working capital 

Conclusion: working capital loans from your home equity

Home equity loans from Alpine Credits make one of the best alternatives to working capital loans. Unlike loans from traditional lenders, you do not need to provide your credit score or the business’ financial health. Business owners with at least 25% equity in their property are eligible for a home equity loan to use towards their entrepreneurial goals.  

By getting a home equity loan, you get some of the same benefits as a working capital loan and unique aspects of home equity loans. Interest rates are comparatively lower than business loans or business credit cards with a home equity loan, and they offer just as much flexibility. You can promote your business growth because home equity loans offer more than enough cash. 

Apply now

Frequently asked questions

Working capital loans are financing for your business’ everyday operations. They are smaller than standard business loans and require repayment within a year or two. 

You can apply for a working capital loan at credit unions and banks, but remember that you’ll need to meet their requirements. You may have to provide the business’ financial history, among other factors. You can also consider a home equity loan from Alpine Credits that you can use to finance your everyday operations.

Financial institutions and credit unions can offer working capital loans, but one of the best places to get one is from Alpine Credits. A home equity loan from them can act as a working capital loan with more flexible requirements.