How to Use a Working Capital Loan (Canada)

Why working capital is the quiet engine of growth

Growth rarely fails for lack of demand—it stalls because cash arrives after costs. Winning a new contract, opening a second location, ramping production, or stocking seasonal inventory all require cash before revenue shows up. A well-structured Working Capital Loan closes that timing gap so you can execute now without starving day-to-day operations.

Use our calculator to model payments in minutes, then choose the structure that matches your plan.

When a working capital loan is the right tool

Common Canadian use cases where working capital unlocks revenue:

• Inventory buys & early-pay discounts: Stock up ahead of a sales window and negotiate supplier terms.
  
  
• Contract mobilization: Labour, materials, and freight for construction jobs or new lanes in trucking.
  
  
• Launches & expansions: Deposits, signage, light build-outs, and opening inventory for a new site.
  
  
• Hiring & training: Staff ahead of demand without straining payroll.
  
  
• Marketing sprints: Short, time-bound campaigns to capture seasonal demand.
  
  
• Bridging seasonality: Smooth operations when receivables lag or sales are cyclical.
  
  

If you also need hard assets (truck, machine, oven), finance the asset with Equipment Loans or Equipment Leases and reserve working capital for everything around it—permits, install, materials, the first payroll, and HST/GST.

Map your cash conversion cycle (and fix the pinch)

Before borrowing, sketch your cash conversion cycle: when cash leaves (deposits, freight, payroll) vs. when it returns (invoice payment). If the gap repeats monthly, a reusable Line of Credit may beat a one-time loan. If it’s a single push (new location, large PO), a working capital loan is typically cleaner.

Quick rule of thumb:

• One-time, project-based need → Working capital loan
  
  
• Rolling purchases/collections → Line of credit
  
  
• Slow-pay customers → Invoice/Freight Factoring
  
  

Model the ROI before you borrow

Use the calculator to compare three versions of your plan:

1. A shorter term (lowest total cost) if cash flow can handle it.
   
   
2. A mid-term to protect margins during ramp-up.
   
   
3. A bridge + refinance path: use a fast facility now, then move to lower-cost Business Refinancing once revenue stabilizes.
   
   

Pressure-test with a downside case (slower sales, delayed receivables). If the plan still works, you’re likely ready.

Pick the structure that matches your expansion

Explore each option: Working Capital Loan, Line of Credit, Invoice/Freight Factoring, Merchant Cash Advance, and Term Loan.

Industry-specific plays that work

• Transportation & Trucking: Fuel, tires, and maintenance spike when adding lanes. Pair asset financing for tractors/trailers with a working capital loan for onboarding drivers and operating costs. See Transportation & Trucking.
  
  
• Construction & Contractors: Use capital to mobilize—permits, materials, and payroll—while financing excavators/telehandlers separately. See Construction & Contractors.
  
  
• Manufacturing & Wholesale: Blend a working capital loan for raw materials with Asset-Based Lending on AR/inventory as you scale. See Manufacturing & Wholesale.
  
  
• Hospitality & Food Service: Cover pre-opening costs and initial inventory, then consider Rent-to-Own (Hospitality) for ovens, refrigeration, and POS. See Hospitality & Food Service.
  
  
• Medical, Dental & Wellness: Finance imaging/chairs with equipment solutions; use working capital for tenant improvements, staffing, and marketing. See Medical, Dental & Wellness.
  
  

Package your request for a 24–48h decision

What gets fast approvals isn’t luck—it’s a clean file:

• 3–6 months business bank statements (PDFs, all operating accounts).
  
  
• One paragraph “use of funds”: what you’ll buy, when, and how the payment is covered (contracts, margins, or cost savings).
  
  
• If secured: collateral list and insurance plan; if not, see Unsecured Loan.
  
  
• If lower pricing matters: be open to a Secured Loan or pledging AR/inventory via Asset-Based Lending.
  
  
• If cash is locked in owned equipment: unlock it with Refinancing & Sales-Leaseback, then deploy working capital where it earns the most.
  
  

Common mistakes (and quick fixes)

• Vague purpose: Replace “growth” with specifics—“$120k for inventory to fulfill PO #123 by Nov 15; gross margin 28%; net cash payback in 60 days.”
  
  
• Incomplete statements: Send consecutive months for all accounts; no screenshots.
  
  
• Product mismatch: Rolling needs? Use a Line of Credit; single push? Working capital loan.
  
  
• Ignoring taxes/fees: Model HST/GST and delivery costs in the calculator.
  
  
• No contingency: Add a 10–15% buffer to prevent mid-project strain.
  
  

Case study: Turning a big PO into repeat revenue

Situation: A Ontario distributor won a national grocer trial but needed $200,000 for inventory and logistics weeks before first payment.
Plan: Modeled 12- and 18-month options in the calculator; chose a 12-month Working Capital Loan to keep total cost down, plus a small Line of Credit for reorders.
Outcome: On-time delivery with healthy fill rates; the grocer converted to quarterly orders. Six months later, Mehmi executed Business Refinancing to lower ongoing cost.

A simple playbook to deploy capital confidently

1. Quantify the gap: List exact costs blocking revenue (inventory, deposits, freight, payroll).
   
   
2. Match the tool: Loan for a push, LOC for recurring, factoring for slow AR.
   
   
3. Model three terms in the calculator and pick the safest plan that still protects margin.
   
   
4. Assemble documents and your one-paragraph ROI/use-of-funds.
   
   
5. Apply and execute: If assets are part of the plan, finance them via Equipment Financing and keep working capital focused on movement—people and product.
   
   

FAQ: Working capital loans for growth

How fast can I be approved?
Clean files often see decisions in 24–48 hours, with funding shortly after. Start with the calculator and send your statements via Contact Us.

Are these loans secured or unsecured?
Both exist. Unsecured can move faster; Secured options may reduce cost.

What terms are typical?
Most working capital loans run 6–24 months. Larger, longer initiatives may fit a Term Loan.

Can startups qualify?
Yes—structure matters: smaller amounts, shorter terms, clear use of funds, and strong personal credit help. If equipment is core, see Equipment Loans.

What if cash is tied up in equipment I already own?
Consider Refinancing & Sales-Leaseback to unlock equity while keeping assets in service.

Is a line of credit better for repeated purchases?
Often, yes. A Line of Credit is reusable; borrow, repay, and draw again as cycles turn.

If your next stage of growth is being held back by timing—not demand—we can help you structure a plan, compare options, and fund quickly. Feel free to contact our credit analysts via Contact Us, or test scenarios with the calculator. Learn more About Us and the Industries we support.

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