Quick answer
A working capital loan pays for the day-to-day running of a business, including stock, wages, rent and supplier bills, while its own cash is locked up in unsold stock or unpaid invoices. Trading businesses can often reach $5,000 to $500,000 unsecured, sized on turnover and statements, and smaller amounts can sometimes be funded on the same day.
Key points
- It bridges the delay between paying costs and being paid.
- Growth, slow customers and stock all consume it.
- Borrow the size of the gap, not the size of the offer.
- It treats a timing problem, not a loss-making business.
- Typical amount
- $5k – $500k unsecured
- Bigger needs
- $20k – $5m with property
- Speed
- Same day possible, smaller sums
- Sized on
- Turnover and bank statements
Picture a business as a pipe. Cash goes in at one end as it pays for stock, labour and rent. It comes out at the other end when customers pay. The volume of cash sitting in the pipe at any moment is the working capital the business needs. Lengthen the pipe, by selling on longer terms or stocking up, and more money is needed to keep it full.
When there isn’t enough, nothing is wrong with the product or the customers. The pipe is simply too long for the cash available. A working capital loan tops it up.
Where the cash gets stuck
Three places absorb it:
| Where | How it happens | Everyday example |
|---|---|---|
| Stock | You pay suppliers before shoppers pay you | A gift shop buying for the Christmas season |
| Debtors | Work is done but invoices remain unpaid | A contractor waiting 55 days on a 30-day account |
| Prepayments | Costs are paid before the benefit arrives | Annual insurance or vehicle registrations |
Offsetting these are your creditors, the bills you haven’t paid yet. If debtors and stock grow faster than creditors, cash drains away. This is why growing firms so often feel short of money. Read more in profitable but no cash.
Situations where it works well
- A growth spurt that needs extra stock and labour before extra revenue arrives
- A large customer that pays slowly and holds tens of thousands of dollars hostage
- A seasonal peak or trough, including the quiet January break
- A sudden shock, such as a repair or a supplier demanding payment up front
It is the wrong tool if the business is losing money each month. Borrowing then buys time but not a solution.
A timing problem rather than a profit problem? Start a quick enquiry.
How fast can it arrive?
For smaller unsecured amounts, funding on the day is possible once statements, ID and business details have been checked. Property-secured amounts take a little longer, though $20k to $250k can be same-day and up to $5m within a day or two.
Working out the right size
A simple four-step method:
- List expected receipts for the next eight to twelve weeks, by date.
- List all payments due in the same period, including GST and PAYE.
- Run the balance forward week by week.
- The lowest point, set against the minimum buffer you want to hold, is the gap.
The cash gap calculator does this arithmetic for you. Most owners find the actual gap is smaller than the figure that keeps them awake.
Loan or line
A loan delivers a lump sum for a particular gap. A line gives a limit you can use repeatedly. When shortfalls recur at irregular intervals, the cash line usually fits better. For one big stock order, a loan is simpler.
What a lender will weigh
- the level and pattern of deposits
- the behaviour of the account, including overdrawn days and dishonours
- existing loans and advances
- any Inland Revenue arrears, ideally on a formal arrangement
Signs you may need more working capital
- Suppliers are being paid later than you would like, and they’ve noticed.
- You are declining orders for lack of money to fund them.
- The account looks fine at month end but dips alarmingly in the middle.
Any of these point to a business that has outgrown its cash. A top-up sized properly can reset things.
Keeping working capital healthy afterwards
A top-up works best alongside better habits. Review debtor days monthly, set reorder levels so stock does not overshoot, and keep tax money in its own account. Revisit your prices each quarter, because rising costs can quietly erode the margin that feeds working capital. If you find yourself borrowing more each year for the same pattern, the issue may be structural rather than temporary, and it is worth discussing with your accountant. Funding should buy time to fix the cycle, not substitute for fixing it.
An illustrative example
Illustrative only. A Christchurch online homewares store doubles its volume after a campaign. It now needs about $90k of stock every six weeks, yet the payment platform holds funds for several days and trade buyers settle after 30. Eighteen months of rising deposits support a working capital facility, and the owner stops turning orders away.
Find out what is possible
If your business is busy but the account does not show it, ask us. The enquiry takes about a minute and does not involve a credit check. Your details stay with one team, and a real person reads your situation and phones you.
Reliable figures for turnover and the gap you need to cover make the first conversation count.
Frequently asked questions
What is working capital?
The money a business needs to keep going between paying its costs and collecting from customers. Stock and unpaid invoices both soak it up.
How does this differ from other business loans?
Purpose. It funds operating costs, not a long-term asset like a building, so terms tend to be shorter and sizing leans on trading performance.
Can a young business get one?
It is harder without history, as unsecured sizing relies on statements. Owners with property equity have more choice because the asset carries more of the weight.
How much working capital should I hold?
There's no single answer. Many owners aim for several weeks of fixed costs. The cash runway guide shows how to count yours.
Can I use it for a tax bill?
Yes, tax is a legitimate business cost. Whether borrowing or an Inland Revenue instalment arrangement is cheaper depends on the amount and timing, so compare both.