Working Capital Loan vs. Business Line of Credit: Which Does Your Business Need?

When your business needs capital, two of the most common solutions you'll encounter are a working capital loan and a business line of credit. Both provide liquidity. Both can be applied for online. But they work very differently — and choosing the wrong one can cost you money or leave you under-capitalized at the wrong moment.

This guide breaks down both products clearly, shows you a side-by-side comparison, and gives you a practical framework for deciding which one fits your specific situation.

Quick Comparison: Working Capital Loan vs. Line of Credit

What Is a Working Capital Loan?

A working capital loan is a lump sum of capital you receive upfront and repay over a defined period — typically daily, weekly, or monthly over 3–24 months.

Working capital loans are designed for businesses that need a specific amount of capital for a defined purpose: buying a large inventory order, funding a marketing campaign, covering payroll during a slow month, or bridging a cash flow gap while waiting on receivables.

How Working Capital Loan Repayment Works

Most online working capital lenders (including the 50+ funders in the OneDay Capital network) use one of two repayment structures:

• Fixed daily or weekly ACH: A set dollar amount is debited from your bank account each business day or week until the loan is repaid. This is predictable but can put pressure on cash flow during slow periods.
• Revenue-based repayment (MCA style): A percentage of daily sales or deposits is remitted until the total repayment amount is satisfied. This adjusts with your actual revenue — better for seasonal businesses.

What Is a Business Line of Credit?

A business line of credit is revolving credit — similar in concept to a business credit card, but typically with higher limits and lower rates. You're approved for a maximum amount (say, $150,000), and you can draw any amount up to that limit at any time.

You pay interest only on what you've drawn, not on the full approved amount. When you repay, that balance becomes available again — no new application required.

How a Line of Credit Repayment Works

Most business lines of credit have a draw period (when you can borrow) and a repayment period. During the draw period, you typically pay interest-only on your outstanding balance. You can repay and redraw as needed. Some lines have a minimum monthly payment based on the outstanding balance.

Key Differences in Practice

Flexibility

A line of credit wins on flexibility. If your cash flow needs are unpredictable — one month you need $20,000, another month you need $80,000 — a line of credit lets you calibrate exactly. A working capital loan gives you a fixed amount regardless of what you actually end up needing.

Cost

A line of credit is generally cheaper on a per-dollar basis because you only pay for what you draw. But the interest rate on a line of credit is an ongoing cost — if you keep a large balance drawn for a long time, costs accumulate. A working capital loan has a fixed, known total cost that you can calculate upfront.

Speed and Accessibility

Both can be fast. Working capital loans from online lenders can fund same-day. Lines of credit may take slightly longer to set up but are then immediately available for repeat draws.

Working capital loans (especially revenue-based products) are more accessible with lower credit scores. Business lines of credit typically require 580+ personal credit and 1+ year in business for the best options.

When to Choose a Working Capital Loan

• You have a specific one-time need with a defined amount (inventory purchase, equipment, marketing campaign)
• You want a fixed repayment schedule with a known end date
• Your credit score is below 580 — working capital loans (especially MCAs) are more flexible
• You need funding this week — same-day working capital is widely available
• You've been in business less than 1 year

When to Choose a Business Line of Credit

• Your funding needs are ongoing or unpredictable — you want a safety net
• You're a seasonal business that needs capital in your ramp-up period and repays after peak season
• You want to pay interest only on what you use, not a fixed repayment on a full lump sum
• You have a credit score of 580+ and 1+ year in business
• You want revolving access without reapplying each time you need funds

Can You Have Both?

Yes — and many businesses do. A common structure is a working capital loan for a specific, defined need (e.g., buying out a competitor's lease) and a line of credit for ongoing operational flexibility (payroll gaps, vendor payments, seasonal ramp-up).

The key constraint: make sure your daily or monthly cash flow can service both repayment obligations. Stacking multiple products without modeling your cash flow is how businesses create problems for themselves.

How to Apply

Through OneDay Capital, one application surfaces both working capital and line of credit options simultaneously from 50+ funders. You can compare offers side-by-side and choose the structure that fits your needs — without filling out multiple applications.

Frequently Asked Questions