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Working Capital Loan For Real Estate: A Brief Guide

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Real estate developers, like other businesses, don’t always have enough to cover the daily expenses of projects.

Sometimes, developers hit a wall and need to pay for an unexpected but necessary cost. It disrupts the budget, and when another expense comes, there’s not enough to cover it. So, the company would take out a working capital loan to cover a short-term fee. But what is it exactly, and how does it work? In this property blog, we look at the ins and outs of working capital loans.

What Is A Working Capital Loan?

A working capital loan bridges the financial gap that companies may have when they don’t have enough funding to sustain a project. For example, real estate developers use this working capital loan from Credibly to fund daily operations short on a budget. But the loan isn’t meant to purchase investments or assets.

Businesses of various sizes use capital loans as supplemental budgets when shortfalls happen. They can also use it for multiple purposes, including project management.

How Is A Working Capital Loan Used?

The working capital loan is only for short-term use to sustain payroll, consolidate debts, and keep rent and other company needs.
A working capital loan, for example, can be used to create more products if the demand for them exceeds production. The loan could help boost production and create inventory promptly.

At the same time, real estate developers can take advantage of discounts offered by construction suppliers for large orders, if any.

After acquiring the loan, it can also help construction companies manage their cash flow. In a way, it is an investment where the business will benefit by keeping its health and profit margin steady.

Methods of acquiring working capital loans can be secured or unsecured, but most lenders prefer to be backed by collateral. Although not as common, getting an unsecured capital loan is possible, but it requires a high credit history as assurance that lenders will repay the loan.

Working capital loans are taken as a lump sum, and the lender has the right to demand payment at any time because it is considered a demand loan.

Primarily, the term, interest rate, and period of amortization are calculated depending on the capacity of the company or borrower to cover payments. Lenders also consider how they secured the loan.

Since working capital loans are collateral-based, some lenders will consider land or real estate. They may grant longer payment terms, and the interest may also be favorable to the borrower.

Features Of A Working Capital Loan

What are the core features of a working capital loan? Let’s take a look at them.


Loan Amount

The amounts that are offered through a Working Capital Loan. It will depend on the requirements, experience, and tenure. The loan is customizable depending on the needs of the business.


Repayment is the indicated schedule of when the borrower must repay the loan. It is designed to match the cash flow of the business.

Interest Rate

The interest rate is a crucial factor in financial decisions, as the accrued interest varies from one bank to another and may depend on the borrower’s needs. When searching for the best bank savings interest rates, individuals often explore various options to ensure their money grows optimally.

It’s essential to compare rates offered by different banks, considering factors such as the type of savings account and the length of the investment period. By doing so, individuals can make informed choices that align with their financial goals, ensuring that their savings work effectively for them.


The need for collateral may depend on the lender. Various examples of collateral are property, securities, and gold, which are easy to liquidate if the borrower defaults on the loan. Collateral can even be the business itself. If the loan is unsecured or doesn’t require collateral, the lender must check eligibility through the lender’s tax returns, financial statements, and credit score.

Processing Fee

The amount charged by banks to process the loan application is called the processing fee. The cost may depend on the bank or lending institution.

Age Requirement

A loan requirement that states the age range of the eligible borrower. Commonly, the age should be over 21 and under 65 years old.


The working capital loan applies to entrepreneurs, sole proprietorships, partnership firms, MSME, private or public companies for professionals and non-professionals.

Advantages Of A Working Capital Loan


The loan type accepts various kinds of collateral such as real estate, machinery, lease rentals, bills, receivables, and more.


Lenders who provide working capital loans don’t issue restrictions on where you can or can’t use the money. The kind of control borrowers get allows them to use the loan to see it fit their business.


Compared to business or personal loans, working capital loans are easier to apply for because of paperwork. This type of loan is released within a week of approval. Business owners can quickly make decisions because lenders have a sense of urgency when providing a capital loan.

Types Of Working Capital Loans

1. Short-Term Loans

Businesses that need to cover daily expenses can apply for the short-term loan option. This loan type tended to have shorter terms and was paid back within one year. They are also sometimes called cash flow loans. The money from short-term loans is not for real estate or equipment purchases. Compared to business loans, short-term loans have higher interest rates.


2. Working Capital Lines Of Credit

Known as a flexible kind of loan, you can borrow only as much as you need and pay it back. You can also borrow in the future without needing another application. Aside from getting access to these funds, you will only need to pay interest on the money you have used. The credit line can serve as a source of emergency funding, and the company can use it when they need working capital once more.

3. Invoice Financing

If your business tends to invoice goods or services after the customers receive the invoice, financing may be for you. It may cause cash flow problems if you wait for customers to make payments. You can borrow money against unpaid invoices when times become rough with invoice financing. You can then pay back the loan with interest once the customers have paid their dues. Another option is invoice factoring. This is when a lender can buy the unpaid invoices and collect the payments from the customers.

4. Merchant Cash Advances

This option is not to be mistaken for a bank loan. But it is another access to funding to meet your daily business needs. It involves credit card payments where the lender will deduct a fraction from sales that go into the card. The process continues until the interest and fees are fully paid.

Lenders are issuing cash advances faster than other financing options, but the APR can range from 70% to 200%. Businesses that wish to make a merchant cash advance must have a good credit standing and personal credit.

How To Know If It’s Right For You?

A strong cash flow is necessary to keep a business afloat, but it can run out sooner than expected without proper management. But it’s not always because of human intervention that cash flow can be compromised.

Various factors can impact a budget already set in any business, big or small. Unforeseen events may cause your business to default from specific obligations. It can happen when the company is expanding or when the industry is experiencing downtimes.

Various lenders offer working capital loans to provide business owners with a fighting chance to cover expenses. It is so that the business continues and doesn’t suffer for long.

In Conclusion

Real estate companies and other businesses can use working capital loans to continue operations. Banks and lenders offer it depending on whether the company is stable enough to keep steady repayments. While it is available secured and unsecured, they are still conditional because lenders need a guarantee to repay the loan with interest. Otherwise, it needs collateral backup.