by Chai Jagarlamudi
Running and growing a business is a balancing act. Not only do you have to manage clients, vendors, employees, and the million “unexpected” problems that pop up, but you also have to maintain consistent, healthy cash flow. And let’s be honest—that’s not always easy.
If you’re a new business owner, taking out a loan might sound intimidating. And if you’re a seasoned entrepreneur going through a rough patch, the idea of borrowing could feel equally daunting. But not all business loans are created equal. What if you could repay a loan using a percentage of your daily sales—automatically? That’s exactly what a working capital loan from Velocity Merchant Services (VMS) offers.
What is a Working Capital Loan?
Working capital refers to the funds a business has available to cover its day-to-day expenses. It’s calculated by subtracting your current liabilities from your current assets. If the result is positive, you’ve got working capital to invest in operations, payroll, inventory, and more.
A working capital loan—also known as a cash advance loan—is designed to give your business short-term liquidity to keep things moving. It’s not like a traditional loan for buying equipment or real estate. Instead, it’s all about smoothing out cash flow gaps so you can run your business without skipping a beat.
For seasonal businesses or those dealing with customer payment delays, working capital loans can be the difference between growth and a slowdown.
These types of loans are particularly effective for businesses that rely on recurring but inconsistent revenue streams. Retailers preparing for holiday rushes, service providers waiting on invoices, or restaurants facing a slow winter season can all benefit from a working capital infusion.
How It Works with VMS
Here’s what makes working capital loans from VMS especially business-friendly:
You borrow a set amount of money. You agree to a daily withholding percentage (say, 10%). Each day, a percentage of your actual sales is automatically applied toward your loan repayment.
So, if you make $2,000 in daily sales and your withhold rate is 10%, then $200 is applied toward your loan that day. If sales drop to $1,000, your payment adjusts to $100. This flexible repayment model aligns your loan with your business activity.
No rigid monthly payments. No risk of missing a due date. No pressure to pay more than you’re generating.
Plus, VMS helps merchants manage and track repayments with clear reporting tools. You’ll always know exactly how much has been paid and how much remains, without digging through statements or calling your provider.
When Should You Consider a Working Capital Loan?
Cash flow issues don’t only happen to struggling businesses. In fact, growth often causes cash crunches. When sales ramp up, expenses can increase before revenue is collected. You might be waiting on a large invoice while needing to buy supplies, pay staff, or take on new work.
Even successful businesses face temporary shortfalls. Maybe a delayed vendor shipment impacts your product line. Maybe your expansion plans outpaced your budget. Or maybe a large client hasn’t paid their invoice on time.
A working capital loan makes sense when your business is growing faster than your reserves, you’re experiencing a seasonal slowdown, or you simply want to jump on a time-sensitive opportunity. It helps you cover short-term obligations without sacrificing momentum.
For businesses with inconsistent cash flow cycles, working capital loans can provide much-needed stability and peace of mind.
Why It’s Better Than Traditional Loans
Credit cards come with high interest rates and low borrowing limits, making them impractical for covering big business expenses like payroll or rent. Bank loans can offer better rates, but applying takes time, documentation, and there’s no guarantee of approval.
Plus, bank loans often require a detailed explanation of how the money will be used. A working capital loan doesn’t lock you into a rigid use case. Whether you’re covering payroll, launching a campaign, or restocking inventory—you get to decide.
Many working capital loans are also unsecured, meaning you don’t need to risk personal or business assets to qualify. That makes them a flexible, accessible funding option.
Bank loans are also typically more rigid in their repayment structure. A missed payment could trigger fees, damage your credit, or jeopardize your loan altogether. With working capital loans tied to your revenue, repayments scale up or down with your sales. It’s a more forgiving, more agile solution.
Key Benefits of Working Capital Loans
Approval is fast—often within 24 to 48 hours. You don’t have fixed monthly payments, and repayment adjusts to match your sales. The funds can be used across your business as needed. No collateral is usually required. Repayments are automatic and easy to manage.
This type of loan is also accessible for business owners who may not qualify for a traditional loan. New businesses, or those with less-than-perfect credit, can still access funds based on their sales activity rather than just their credit history.
Working capital loans also help business owners avoid unnecessary financial pressure. Instead of guessing how much to repay or when, you’re automatically paying a percentage of what you’ve already made. That means your cash flow remains consistent, and you maintain operational control.
Smart Ways to Use Working Capital
Businesses use working capital loans to take advantage of new opportunities and manage daily operations. You can:
Stock up on inventory before a seasonal rush. Hire extra staff to serve more customers. Expand your space or storage. Launch marketing campaigns. Take advantage of vendor discounts. Cover surprise expenses without dipping into reserves.
You’re not required to use the funds in a specific way—the flexibility is one of the biggest advantages. Maybe your walk-in fridge needs repairs, or you want to upgrade your signage. Maybe you’re ready to add a new product line or run a holiday promotion. Whatever your goals, working capital helps you get there.
Even better, working capital loans don’t require you to delay action. Unlike traditional financing, which can take weeks to process, working capital loans can be approved quickly, so you don’t miss out on time-sensitive opportunities.
Working Capital in Real-World Scenarios
Let’s look at a few examples of how different types of businesses might use working capital funding:
A retail boutique uses it to purchase spring inventory in January, ensuring shelves are stocked before competitors. A restaurant secures funding to cover payroll during a slow winter, then ramps up hiring for patio season. A construction company bridges the gap between project completion and client payments, keeping vendors and subcontractors happy. A salon owner refreshes their interior space before a rebranding campaign. A small bakery uses working capital to buy ingredients in bulk and launch a catering service for local offices.
In each case, the funding isn’t about fixing a broken business—it’s about enabling smarter decisions, smoother operations, and sustainable growth.
Final Thoughts
A working capital loan isn’t just a lifeline when things get tight—it’s a growth tool that lets you take on challenges and opportunities with confidence. Whether you’re navigating seasonal slumps, handling late-paying clients, or planning your next big move, flexible funding from VMS keeps your business running smoothly.
If you’ve ever hesitated to borrow, consider this: working capital loans are designed to support your momentum, not stall it. They’re structured to adapt to your business, not the other way around.
Ready to stabilize your cash flow or fuel your next expansion? Let’s talk about how a working capital loan can fit your goals.
Velocity Merchant Services believes in small business—and we make it easier to keep yours thriving.
