A working capital loan is short- to medium-term borrowing used to fund day-to-day trading rather than a specific asset. It bridges the gap between money going out — stock, wages, suppliers, tax — and money coming in from customers. It is repaid over an agreed term, usually in regular instalments.
Typical uses include buying stock ahead of a busy season, funding a large order before the customer pays, covering a quiet trading period, or smoothing out irregular income. Because there is no asset being bought, lenders look mainly at your trading performance, bank conduct and the strength of the business.
Personal guarantees are common on this kind of lending, and some lenders will take a debenture or other security. That means a director’s own position can be exposed if the business cannot pay.
The risk to weigh is that a working capital loan does not create new income by itself — it moves cash forward in time. If the underlying cash flow problem is structural rather than temporary, borrowing can deepen it. Terms, cost and availability depend on your circumstances and the lender’s assessment, and approval is never guaranteed.