If you searched “net working capital,” you are probably trying to make sure your business has enough cash for day-to-day costs. The formula, the four types and what counts as a good ratio are accounting questions. Your accountant or bookkeeper can work them out from your own balance sheet, and that is the quickest route to those numbers. This guide covers the funding side: how small businesses pay for working capital, what SBA programs allow, and what that money typically costs.
Why do small businesses seek financing?
The Federal Reserve Banks’ 2026 Report on Employer Firms, based on the 2025 Small Business Credit Survey, found that 60% of firms applied for financing in the 12 months before the survey. The most common reason was to meet operating expenses (56%), followed by expansion or a new opportunity (46%).
Of those applicants, 42% received the full amount they sought, 36% received some or most, and 22% received none. The survey was fielded from September 3 to November 14, 2025, with 6,525 responses. It is a convenience sample, and the Reserve Banks say results should be read with possible biases in mind.
What do SBA loans allow you to use for working capital?
SBA’s 7(a) loan page says the 7(a) program can be used for “short- and long-term working capital,” among other purposes. As of October 28, 2026, the page lists a maximum loan amount of $5 million. You apply through a local lender, not directly with SBA.
The table below compares the SBA programs on SBA’s own pages, as of October 28, 2026.
| Program | Maximum | Working capital use | Repayment and rate notes |
|---|---|---|---|
| SBA 7(a) loans | $5 million | Yes, short- and long-term working capital | Most term loans repay with monthly principal and interest. Fixed-rate payments stay the same. Variable-rate payments can change. |
| SBA 7(a) Working Capital Pilot (WCP) | $5 million line of credit | A monitored line of credit | Maximum maturity 60 months. Guarantee 85% on loans of $150,000 or less, 75% above that. |
| SBA microloans | Up to $50,000; average about $13,000 | Yes, listed as an example use | Interest generally 8% to 13%, varying by intermediary lender. Maximum term seven years. Cannot pay existing debts or buy real estate. |
| SBA 504 loans | See SBA page | No, the page says a 504 loan cannot be used for working capital or inventory | Long-term financing for major fixed assets. Terms of 10, 20 or 25 years. Rates are pegged to an increment above the 10-year Treasury. |
What does an SBA working capital line require from my business?
SBA’s WCP page describes a good fit as a business that has at least one year of operating history and can produce timely and accurate financial statements, accounts receivable and accounts payable agings, and inventory reports. If you are checking whether your books are in shape, those are the reports to pull first.
The WCP interest caps depend on loan size. The caps are a ceiling over the base rate, as listed on the SBA page:
| Loan size | Maximum rate (SBA WCP terms) |
|---|---|
| $50,000 or less | Cannot exceed base rate plus 6.5% |
| $50,001 to $250,000 | Cannot exceed base rate plus 6.0% |
| $250,001 to $350,000 | Cannot exceed base rate plus 4.5% |
| $350,001 and greater | Cannot exceed base rate plus 3.0% |
SBA’s procedural notice on alternative base rates, effective March 1, 2026, says the prime rate is one of the base rates a lender can use. Your lender will tell you which base rate applies to your loan and how often it resets.
What does a merchant cash advance cost?
A merchant cash advance (MCA) is usually structured as sales-based financing. The Texas Senate Research Center’s analysis of H.B. 700 (engrossed, May 22, 2025) describes MCAs as providing “an upfront cash payment in exchange for a percentage of future sales revenue.” The same analysis says these deals “are currently not disclosed as loans.” That is the bill sponsor’s framing, not a court ruling.
The FTC’s January 2022 press release says MCA companies generally “provide funds to businesses in exchange for a percentage of the businesses’ revenue,” and that a provider will typically make daily withdrawals from the business’s bank account until the obligation is met.
Ask any MCA provider for two numbers in writing: the factor rate and the total payback in dollars. Compare the total with what a loan or line would cost for the same amount.
What should I watch for in a funding offer?
The FTC has brought several cases against funding providers. In its January 2022 release, the FTC alleged that defendants required personal guarantees and upfront fees after saying they would not, provided less funding than promised, and debited more than they said they would. The same release says the FTC alleged misuse of “confessions of judgment.”
In its February 2024 release on the Jonathan Braun case, the FTC reported a court judgment of $20.3 million, including a permanent ban from the merchant cash advance and debt collection industries. In its November 2025 release on Seek Capital, the FTC said the company advertised no upfront fees and 0% interest credit terms. A federal court found that those misrepresentations violated the FTC Act and the Telemarketing Sales Rule, and the final order permanently bans Seek Capital and its CEO from offering business financing.
Treat these as warning signs: an offer that promises no fees until you are funded, 0% interest, or approval without a review of your books. Ask for every fee in writing before you sign.
Is a merchant cash advance a loan?
Lawmakers and regulators describe MCAs differently. The Texas analysis describes them as sales-based financing that are currently not disclosed as loans. New York’s Attorney General said Yellowstone provided illegal high-interest loans disguised as merchant cash advances. The New York Attorney General’s Yellowstone settlement page, last updated April 16, 2026, reports that the settlement canceled all merchant debts to Yellowstone, totaling $534 million, and that the claim period closed January 9, 2026.
The legal answer depends on the contract and the state, so ask a lawyer before you decide how an offer should be treated.
What are current borrowing costs?
NFIB’s September 2026 Small Business Economic Trends report says the average interest rate paid on short-maturity loans was 8.2% in September, up 0.7 points from August and close to its historical average of 8.3%. A net 8% of owners reported paying a higher rate on their most recent loan.
Those are survey figures for all small businesses, not offers you will get. Your actual rate depends on your lender, your loan size and the base rate.
Before you apply
- Get your financial statements, receivables and payables agings, and inventory reports in order before you call a lender.
- Use SBA’s Lender Match tool to find a participating SBA lender. SBA says you will work directly with the lender.
- Ask for the total payback in dollars, the rate type (fixed or variable), and every fee, in writing.
- Compare a loan or a line with a revolving option. Our working capital loans vs lines of credit guide covers that comparison.
- If the money is for equipment rather than payroll or inventory, the SBA 504 route or a dedicated data center equipment financing option may fit better. Ask a lender which structure matches your use.
Where can I get help with a bad offer?
If a provider’s practices look like the ones in the FTC cases above, keep every contract and bank statement. If you have a problem with a Yellowstone MCA, the New York Attorney General’s settlement page says to file a complaint on the Attorney General’s website.
Is this financial advice?
This page is general information only. It is not personal financial advice, and no lender or program named here has promised you approval, a rate, an amount or a funding date. Rates are as of the dates shown, and prices and terms change, so check current terms directly with the lender.
Your next step is small: ask your accountant for your net working capital figure, then compare it with the options above before you contact a lender.
By USPatriotNews.com Editorial Team
