Working capital loans: keeping the engine running while you grow

Every business has money tied up in the cycle of trading: stock on the shelves, invoices waiting to be paid, wages paid ahead of the work being billed. That pool of cash is working capital, and when it runs thin, even a busy, profitable business can find itself juggling bills. A working capital loan tops up the pool so the business can keep running smoothly — and keep saying yes to work.

What squeezes working capital?

The usual suspects:

• Growth. More work means more wages, materials and stock upfront. See growth finance.
• Seasonality. Quiet months still have rent and wages. See seasonal business finance.
• Slow payers. Customers on 30, 60 or 90-day terms hold your cash for that long.
• A big investment. A fit-out, equipment or vehicle paid from cash drains reserves.
• Tax timing. BAS, PAYG instalments and — from 1 July 2026 under Payday Super — super paid each payday.

Business.gov.au’s guide to managing cash flow recommends setting aside funds for ongoing costs and regularly comparing what you expected against what actually happened. That comparison is often where a working capital gap first shows up.

Which working capital option suits you?

Your situation	Likely fit	Why
Need goes up and down through the year	Business line of credit	Draw and repay as needed
Customers pay you on terms	Invoice finance	Advances against what you’re owed
A specific short gap with a clear end	Cash flow loan	Short, simple, sized on statements
A defined amount for a set period	Unsecured working capital term loan	Predictable repayments
Larger or longer-term needs	Property-secured loan, $20k to $5m	More room, longer terms

The golden rule: match the facility to the length of the need. A long term for a short gap costs more than it should; a short term for a long need creates repayment pressure.

What do lenders look at?

• Bank statements — the flow of money in and out
• BAS and financials for larger amounts
• Aged debtors and creditors — who owes you, who you owe
• The cause of the gap — growth, seasonality, a one-off
• How the gap closes — what changes to bring cash flow back into balance

Need working capital to keep things moving? Tell us about the gap and a specialist will suggest the facility that fits — enquiring won’t affect your credit file.

Working capital loan or fix the cycle?

Finance is one lever. The others are just as important, and business.gov.au’s guidance on improving cash flow covers them:

1. Pricing — review it regularly so margins keep up with costs.
2. Invoicing — send invoices promptly, with clear terms, and follow up late payers.
3. Payment terms — tighten terms for customers, negotiate longer ones with suppliers.
4. Inventory — regular stocktakes and less over-ordering free up cash.
5. Costs — trim what doesn’t earn its keep.

The best results usually come from doing both: fixing the cycle while finance covers the gap.

Illustrative example: A small joinery workshop lands two big kitchen contracts. Materials must be bought upfront, the team works overtime, and the builders pay in stages. A line of credit covers materials and wages between stage payments, and the owner adds a deposit requirement to future quotes to reduce the gap next time.

Warning signs to take seriously

Working capital finance is for timing, not for propping up a business that’s losing money. Pause and look deeper if:

• You’re short every month, not just occasionally
• Margins have been shrinking for a while
• You’re using new borrowing to repay old borrowing
• BAS, super or supplier payments are slipping behind

These can usually be turned around, but the fix may involve pricing, costs or structure rather than more debt. A simple cash flow forecast shows what’s really happening.

How much working capital is enough?

There’s no universal figure. A useful way to think about it is in weeks: how many weeks of fixed costs — rent, wages, loan repayments, insurance — could the business cover if sales paused? Seasonal businesses and those with long debtor terms generally need more cover than businesses paid on the spot. Your forecast will show the low points of the year; working capital finance is often best sized to carry you comfortably through the lowest of them, with a margin for surprises.

Measuring your working capital cycle

A useful way to see how much cash your business ties up is to count the days in its cycle: how long stock sits before it sells, plus how long customers take to pay, minus how long you take to pay suppliers. The longer that cycle, the more working capital the business needs as it grows. Shortening it — faster stock turn, quicker collections, longer supplier terms — can free up cash without borrowing at all, and it makes any finance you do take go further.

Keep the engine running

Tell us what’s squeezing your working capital, how much you need and for how long. A real person will match the facility to your cycle rather than selling you whatever’s easiest. There’s no credit check to enquire, your details stay with the person on your file, and clear, honest numbers on the form help us get to the right answer on the first call. Check your working capital options.