Working capital loans: funding the gap between spending and getting paid

Working capital is the money that keeps the lights on: stock on the shelves, wages paid on time, suppliers kept happy while customers take their time paying you. A working capital loan funds that day-to-day machinery rather than a building or a machine. It’s less a single product than a purpose, and the trick is matching the right structure to where your cash is actually stuck.

What is working capital, really?

The business.gov.au glossary of key financial terms defines working capital as the cash available to a business for day-to-day expenses. It also defines the two halves accountants use to measure it:

• Current assets: cash, or anything you can turn into cash within 12 months, such as stock and money customers owe you.
• Current liabilities: what you have to pay within 12 months, such as supplier bills, tax, wages and super.

A business can be profitable on paper and still short of working capital if too much of its current assets are sitting as stock or unpaid invoices instead of cash in the bank.

How does the working capital cycle create a gap?

Picture the journey of a dollar through a product business:

1. You pay a supplier for stock.
2. The stock sits on a shelf or in a warehouse.
3. You sell it, often on credit terms.
4. The customer pays you, eventually.

The time between step 1 and step 4, less any credit your suppliers give you, is the cash conversion cycle. The longer that cycle, the more cash you need to fund it, and the more it grows as sales grow.

Where cash gets stuck	What stretches it	What shortens it
Stock	Over-ordering, slow lines, long import lead times	Regular stocktakes, clearing slow stock, smaller and more frequent orders
Debtors	Long payment terms, slow-paying customers, late invoicing	Invoicing promptly, deposits, shorter terms, following up
Creditors (works in your favour)	Short supplier terms, paying early without a discount	Negotiating longer terms with suppliers

Much of the “shortens it” column mirrors the business.gov.au guide to managing cash flow, which suggests regular stocktakes to free up cash, invoicing promptly and asking suppliers for longer payment terms. Every day you take out of the cycle is cash you don’t have to borrow.

Which kind of finance suits which gap?

Because working capital is a purpose rather than a product, the right answer depends on the shape of the gap:

• One-off, with a clear end date: a short-term business loan, for example funding a large order that’s paid on delivery.
• Recurring or unpredictable: a business line of credit or overdraft that you draw and repay as the cycle turns.
• Cash stuck in unpaid invoices: invoice finance, which is sized on your receivables.
• Cash stuck in stock: inventory finance, which is secured on the stock itself.
• A general timing squeeze across the whole business: a cash flow loan sized on overall takings.

Unsecured options for trading businesses typically run from $5k to $500k, sized on turnover and bank statements. If the need is larger, or you’d like a longer term, property-secured lending from $20k to $5m is the other path. Once you’ve worked out which gap you’re facing, seeing what you qualify for takes about a minute.

How much working capital should you borrow?

Owners often ask for a round number. A better approach is to work it out from your own cycle:

1. Days in stock: how long, on average, stock sits before it’s sold.
2. Days to get paid: the average time customers take to pay.
3. Days you’re given: the average time you take to pay suppliers.
4. Cycle length = days in stock + days to get paid − days you’re given.
5. Funding need ≈ cycle length × your average daily cash costs.

Then add the bumps you can see coming. From 1 July 2026, the ATO requires employers to pay super with each payday, with contributions reaching funds within 7 business days. For a business that used to pay super quarterly, that brings a chunk of cash out of the cycle earlier than before.

A lender will appreciate the working, and you’ll avoid both borrowing too little and paying for money you don’t need.

Illustrative example

Illustrative example: A small food manufacturer supplies independent supermarkets. Ingredients and packaging are paid for 14 days after delivery, product sits in stock for about 30 days, and supermarkets pay 45 days after invoice. That’s a cycle of roughly 61 days. With cash costs of about $4k a day, the business needs around $240k tied up in the cycle at any time. Now a new distributor wants to double volume. On those numbers, the working capital need roughly doubles before the first larger payment arrives. Part of the extra need is covered by negotiating 30-day terms with the packaging supplier. The rest comes from a revolving facility sized on the business’s banked turnover, which scales down again in the quieter months after Christmas. The manufacturing business loan page covers how lenders read this kind of operation.

What do lenders look at?

• Bank statements, usually six to twelve months, for turnover, buffer and account conduct.
• BAS and lodgement history, to confirm turnover and that tax is under control.
• Debtor and creditor reports from your accounting software, to see the cycle in numbers.
• Stock levels and turnover, especially for product businesses.
• Concentration, meaning whether one customer makes up most of your income.
• Existing finance, as other lenders already debiting the account narrow the room.

The industry finder shows how these checks play out in different sectors.

Common working capital mistakes

• Funding long-term assets from working capital. Paying cash for equipment drains the float you need for wages. Asset finance exists so you don’t have to.
• Growing faster than the cash allows. Saying yes to every order without working out the cash it consumes.
• Ignoring the debtor ledger. A pile of 90-day invoices is a working capital problem hiding in plain sight.
• Borrowing to cover losses. If the business loses money every month, more working capital just funds the losses for longer.

Is cash tied up in your stock or invoices?

If your business is busy and profitable but the cash keeps vanishing into shelves and unpaid invoices, working capital finance is designed for exactly that. Checking your options is simple. The enquiry takes around 60 seconds and there’s no credit check when you first make it. Your information isn’t passed around to a queue of lenders. A real person works through your cycle and rings you to talk it over. Please fill in the form as accurately as you can, including turnover, existing debts and whether you own property, so the first option we bring you is one that genuinely fits.

See how much working capital you could unlock →