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BUSINESS FINANCING · CANADA & USA
Working Capital Loans
Cover payroll, inventory and supplier costs while managing the gap between spending money and collecting revenue.
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What is a working capital loan?
A working capital loan finances day-to-day business costs. It can help address a temporary cash gap, such as paying staff before customers pay their invoices. Working capital describes the purpose of financing; a term loan or another approved facility determines how the money is advanced and repaid.
Illustrative example: A contractor starts a new job and pays wages and materials before the first progress payment. The financing need is the cash gap after available reserves, with repayment tested against both expected and delayed customer payments.
Watch video →What can you finance?
Payroll & hiring
Plan wages and onboarding costs alongside upcoming pay cycles and expected customer receipts.
Inventory & supplies
Include supplier deposits, freight and the time needed to sell stock and collect payment.
Repairs & operating costs
Itemize fuel, maintenance and business overhead. Consider dedicated repair financing for a specific repair bill.
Marketing & seasonal demand
Define the campaign or seasonal requirement and test repayment if sales arrive later than expected.
How much working capital do you need?
Start with the timing of cash, not just your monthly sales. A business can report a profit and still have too little cash on the day payroll or a supplier invoice is due. Prepare a weekly forecast covering the period you need to finance. For a seasonal business, extend it through the slower months and the expected recovery.
List cash available today, realistic customer collection dates and essential outgoing payments. Include wages, rent, supplier invoices, tax obligations and existing debt payments. Separate confirmed receipts from sales you hope to make. The largest projected shortfall is a starting point for the discussion, not an automatic borrowing amount.
Illustrative example: a temporary $10,000 gap
The example below uses a single currency throughout and assumes no new financing. A negative balance identifies a funding gap; it is not an available overdraft. These figures are an illustration, not a Mehmi offer or a customer result.
Period
Cash received
Operating payments
Closing cash
Opening cash
—
—
$15,000
Week 1
$10,000
$22,000
$3,000
Week 2
$12,000
$25,000
−$10,000
Week 3
$30,000
$18,000
$2,000
Week 4
$25,000
$20,000
$7,000
Although this business ends week four with positive cash, it cannot cover all scheduled payments in week two from the funds shown. A $10,000 advance would cover that modelled shortfall before financing costs, but would leave no cushion at its lowest point. Fees deducted from proceeds, new repayments or a late customer payment could increase the need.
Next, add the proposed repayment schedule and test a delay in your largest receipt. If the revised forecast becomes negative again, revisit the amount, timing or structure before proceeding. Also consider whether collecting deposits, reducing slow-moving stock or negotiating supplier terms could narrow the gap.
Working capital is not the same as cash in the bank
Accounting working capital is current assets minus current liabilities. It may include inventory and unpaid invoices that cannot immediately pay your bills. A cash forecast answers a different question: will money be available when each payment falls due? Use both views to explain the request, rather than treating a positive working-capital balance as proof that borrowing is affordable.
When does this type of financing fit?
A defined expense, an identifiable cash gap and a credible repayment source make the purpose easier to assess. Explain what changes after the funds are used: a customer pays, seasonal receipts recover or purchased stock is sold. Financing supports that plan; it does not guarantee the expected revenue.
A seasonal cash gap
An established business buys supplies before a busy period. Check the forecast against a weaker season as well as the expected one, and allow for stock that may take longer to sell.
A new contract
A service business pays staff and materials before receiving a progress payment. Review the customer’s payment terms, acceptance requirements and the cost of completing the work before relying on that receipt.
A short operating interruption
An unexpected expense temporarily reduces available cash. Identify how normal receipts will resume and whether repayments remain manageable while the interruption continues.
For repeated borrowing and repayment throughout the year, compare a business line of credit. If the main issue is unpaid eligible business invoices, explore invoice and freight factoring. Stock purchases may warrant a discussion about inventory financing, while supplier obligations may fit trade and supplier payment financing. Availability and suitability depend on review.
Be cautious when borrowing is needed to cover a recurring operating loss with no clear improvement plan. More debt can deepen that shortfall. Review margins, expenses, customer collections and existing commitments before adding another payment. A major long-lived asset also deserves a separate financing comparison rather than automatically using short-term operating funds.
Who can qualify for working capital loans?
An operating business with documented revenue, a clear use of funds and a supportable repayment plan is positioned for a useful review. Operating history, seasonality, credit and existing commitments affect eligibility. There is no single threshold that applies to every program.
Available options depend on your business location in Canada or the USA. Include the province or state, transaction currency and any cross-border activity in your request.
Apply for financing
The process, step by step.
Review the request
Provide the requested documents and clarify the costs, structure and conditions of any proposal.
Complete agreed conditions
If approved and you choose to proceed, complete the agreement and required conditions before funds are disbursed.
What should you compare before proceeding?
Total financing cost
Compare net proceeds, interest or financing charges, fees and total repayment.
Payment timing
Check the first payment and frequency against actual receipt dates, including slower collections.
Permitted uses
Confirm eligible expenses and any restrictions. Do not assume that funds can be used without conditions.
What strengthens a working capital application?
Give a clear account of the business behind the numbers. Explain how revenue is earned, when customers pay and which expenses must be paid first. A concise spending breakdown and a realistic forecast are more useful than a request for the maximum possible amount.
Explain unusual transactions and seasonal changes
Recent bank activity helps show actual cash movement. Identify one-off deposits, transfers between accounts, returned payments or an unusually quiet period so they are not mistaken for normal trading. If revenue is seasonal, provide the context and supporting records rather than assuming the latest month represents the whole year.
Show existing commitments
Include current loan and lease payments, credit balances and other obligations that affect available cash. State whether business assets already secure financing. A new payment must be considered alongside existing commitments; revenue alone does not establish affordability.
Keep the request consistent across documents
Use the same legal business name, ownership details and requested purpose throughout the application. Have recent financial records, bank statements and a breakdown of intended spending ready. Additional documents may be requested depending on the business, product and location. Do not send account passwords or banking login details.
Applying from Canada or the USA
Identify the legal entity applying, where it operates and whether the request is in CAD or USD. If you sell across the border, explain which entity invoices customers and which currency pays operating expenses. Currency changes and collection timing can affect the forecast. Serving both countries does not mean every financing option has identical requirements or is available in every location.
Before accepting: check the cost and repayment schedule
Compare written terms on the same basis. Two proposals with the same advertised amount can leave different amounts available to spend or create very different payment obligations. Ask for clarification before deciding if a charge, deduction or repayment condition is unclear.
Amount approved versus cash received
Confirm the amount actually deposited after any deducted fees or balances being paid out. Build the spending plan around those net proceeds. Then identify the total amount scheduled to be repaid, any separate charges and the dates payments begin. An interest rate by itself does not describe every cost.
Payment frequency and cash-flow pressure
Review the size and frequency of payments, not only the total cost. Frequent payments may reduce cash before a large customer receipt arrives. A longer repayment period may lower individual payments while increasing total cost. Test the actual proposal against your weekly forecast rather than assuming payments will adjust automatically when sales slow.
Early repayment, security and guarantees
Ask whether paying early reduces the remaining cost and whether any minimum charges or prepayment conditions apply. Confirm any security interest, personal guarantee or reporting requirement in the agreement. An unsecured facility does not necessarily mean there is no personal guarantee. These obligations should be understood before signing.
A useful question to ask
“If my largest customer pays one month late, can I still cover operating costs and every scheduled financing payment?” If the answer depends on another loan or an unconfirmed sale, revisit the plan. Financing should be assessed against a plausible downside as well as the expected outcome.
Working Capital Loans compared with other options
Compare
Working Capital Loans
Business Line of Credit
Invoice & Freight Factoring
Primary purpose
Defined operating cash requirement
Recurring operating cash needs
Eligible unpaid customer invoices
Repayment / cash flow
Agreed payments from business cash flow
Draw, repay and potentially reuse within conditions
Collections, reserves and recourse under the agreement
Main review focus
Revenue, obligations and intended use
Financial records and facility eligibility
Invoice validity and customer payment profile
Costs to compare
Net proceeds, interest or financing charges, fees and total repayment
Net proceeds, interest or financing charges, fees and total repayment
Advance, reserve, fees and collection-related charges
General comparison only. Availability, security and final conditions vary by business, product and location. On smaller screens, scroll the comparison horizontally.
Explore your industry
Find guidance for your sector and how your business operates.
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Explore industry →Frequently asked questions
Can I qualify with limited history or credit challenges?
You can discuss the request, but eligibility is not assured. Limited history or credit concerns may narrow the options or require additional support.
Can financing solve a recurring monthly shortfall?
Borrowing adds payments. Review pricing, expenses and collections if the business consistently spends more than it receives.
How much can I borrow?
The amount depends on the request, financial information and applicable criteria. Start with the documented need and repayment capacity.
How do I work out how much working capital I need?
Map expected receipts and essential payments by week. Identify the largest shortfall after available cash, then include financing payments and a realistic allowance for delays. The request should reflect that gap, rather than simply the largest amount available.
Is this available in Canada and the USA?
Mehmi accepts financing enquiries from businesses in Canada and the United States. Include your province or state, business activity and transaction currency. Available structures and requirements vary by location and request.
What should I compare before accepting an offer?
Compare the total amount payable, upfront cash, payment frequency, security, personal guarantees and early-settlement terms. Check what happens at the end of the agreement and whether the payments remain manageable in a slower month.
Financing guides for your next step.
CANADIAN FINANCING GUIDE
Working Capital Loan Canada: How to Apply
Explore the considerations, documents and contract questions for this financing topic.
Read article →CANADIAN FINANCING GUIDE
Working Capital Loans vs Line of Credit Canada
Explore the considerations, documents and contract questions for this financing topic.
Read article →Tell us what your business needs.
Share your business location, intended use and amount requested to begin a financing discussion.
Apply for financingFinancing is subject to application review and approval. Availability, costs, terms and documentation vary by business, product and location. This page provides general information and is not a financing offer.