What working capital funding is for
Working capital funding is short-term money for day-to-day operating costs rather than long-lived assets. Owners use it to cover payroll while waiting on customer payments, buy materials for a signed job, restock ahead of a busy season or get through a slow month. Roifunder helps businesses get funded through our funding partners and compare the forms it comes in.
Common uses we see owners run the math on:
- Payroll and subcontractor costs while a large invoice is outstanding
- Materials and mobilization for a contract that pays on milestones
- Inventory for a confirmed order or a proven busy season
- A short, known gap such as a slow month between two strong ones
It arrives in a few forms: a short-term loan with fixed payments, revenue-based financing with daily or weekly remittances, or draws on a business line of credit. The cost structure differs, so the comparison has to happen in dollars.
How to calculate the true cost
Start with dollars, not rates. Total cost equals everything you repay minus the cash you actually receive after fees. Divide that cost by the net cash received to get cost per dollar, then divide by the number of months you use the money to get cost per dollar per month. Those three numbers let you line up any two working capital offers.
- Net cash received = amount funded − fees deducted at funding
- Total cost = total repaid − net cash received
- Cost per dollar = total cost ÷ net cash received
- Cost per dollar per month = cost per dollar ÷ months in the term
Example: an offer funds $30,000, deducts a $900 fee and calls for $36,000 in total repayment over six months. Net cash received is $29,100. Total cost is $36,000 − $29,100 = $6,900. Cost per dollar is about 24 cents, or roughly 4 cents per dollar per month. These are illustrative numbers, not a quote or a typical rate. The full worksheet is in our true-cost guide.
| Schedule | Example payment | Monthly equivalent |
|---|---|---|
| Daily (business days) | about $286 | about $6,000 |
| Weekly | about $1,385 | about $6,000 |
| Monthly | $6,000 | $6,000 |
The payback test: does the cash earn more than it costs?
Compare the gross profit the cash makes possible during the term with the total funding cost. If a signed job or confirmed order produces clearly more gross profit than the funding costs, the math works. If the cash only covers a shortfall with no new profit behind it, the funding adds a cost without creating the money to repay it.
Net gain = gross profit the funds make possible − total funding cost
Example: a subcontractor needs $30,000 for labor and materials to start a job worth $80,000 with an expected gross profit of $22,000. Using the illustrative offer above, net gain is about $22,000 − $6,900 = $15,100, if the job finishes and pays on schedule. If the general contractor pays late, the funding payments continue while you wait, so check that other deposits can carry them. See how this plays out by trade on our construction trades page.
Payment frequency and your deposits
Many working capital products collect daily or weekly instead of monthly. Frequency rarely changes the total cost much, but it changes how the payment lands against your deposits. Convert every schedule to a monthly equivalent before comparing: multiply a business-day payment by about 21 and a weekly payment by about 4.33, then compare the result with monthly profit.
The table below shows one illustrative repayment expressed three ways. If your customers pay you monthly but the funding collects daily, the mismatch can squeeze cash even when the monthly totals look fine. More on choosing a schedule in daily vs. weekly vs. monthly payments and converting a daily payment to a monthly figure.
When not to use working capital funding
Skip it when the gap is permanent rather than temporary. If expenses exceed revenue month after month, short-term funding adds a payment to a business that already cannot cover its costs. It is also a poor fit for long-lived assets like machinery, where equipment financing usually spreads the cost over a term closer to the equipment's useful life.
- Recurring losses: fix pricing, costs or collections first; funding only delays the problem at a price.
- Assets that last for years: compare equipment financing or term loans.
- No clear repayment source: if you cannot name the deposits that will cover the payments, wait.
- A payment that fails a stress test: run the revenue-drop test before signing.
What you’ll typically need
- Recent business bank statements
- Basic business and owner information
- A short description of what the funds will cover
- Contracts, invoices or purchase orders if the funds tie to a specific job or order
Frequently asked questions
Is working capital funding expensive?
It can be, compared with longer-term loans, because short terms and quicker decisions usually carry a higher cost per month. Whether it is too expensive depends on what the cash earns. Calculate the total cost in dollars and compare it with the gross profit the funds make possible during the term. If that profit is clearly larger, the cost may be worth paying.
How much working capital should I request?
Request what the specific need requires, not the largest amount available. Price out the payroll, materials or inventory the cash covers, add a modest cushion, and confirm the resulting payment still fits if revenue dips. Borrowing extra raises both the total cost and the payment without adding profit unless you have a clear, earning use for it.
Can working capital funding cover payroll?
Yes. Many owners use it to cover payroll during the gap between doing the work and getting paid. The math is strongest when the revenue that will cover the payments is already contracted or invoiced. If payroll gaps happen every month, the underlying issue is usually pricing, collections or costs, and funding by itself will not fix that.
How is working capital funding different from a line of credit?
Working capital funding often arrives as a lump sum with a set repayment total or schedule. A business line of credit lets you draw what you need and typically charges interest only on the balance you carry. A line can cost less for short, repeated gaps repaid quickly, while a lump sum fits a single, clearly defined need.
Run the numbers, then apply
See which working capital options fit your numbers through our funding partners.
Updated September 14, 2026 · Roifunder Funding Team