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Working capital finance:
what it is and when you need it.
Most companies hit a working capital gap at some point — money going out before money comes in. This guide explains what working capital finance is, the main product types, and how to pick the right one for the kind of gap you have. All without a personal guarantee.
What is working capital?
Working capital is the difference between what a company owns in the short term and what it owes in the short term:
Working capital = current assets − current liabilities
Current assets: cash, debtors (invoices not yet paid), stock
Current liabilities: creditors due within 30 days, loan repayments due
A positive figure means the company has enough short-term assets to cover its short-term obligations. A negative figure means it cannot — it needs to either borrow, delay payments, or draw on reserves.
Crucially, working capital is not the same as profit. A highly profitable company can have a working capital crisis if its cash is tied up in unpaid invoices or stock that hasn't been sold yet. Many fast-growing companies experience exactly this — growth consumes cash faster than profit arrives.
Types of working capital finance
The main product types, and what each is suited to.
- Business overdraft. A flexible buffer attached to the company's bank account. The company can draw into it and repay freely up to a limit. Suits ongoing, unpredictable cash flow variation. Requires an established banking relationship; can be withdrawn at short notice by the bank; often requires a personal guarantee from the director.
- Revolving credit facility. A pre-agreed credit limit from a specialist lender. The company draws down, repays, and draws again without reapplying each time. Interest charges only on the amount outstanding each day. Suits companies with regular, recurring short-term needs. Credicorp's Flex product is this type.
- Short-term bridging loan. A lump sum for a specific, short-term need — the company borrows on day one and repays in full by a known future date. Daily interest on the outstanding balance. No penalty for early repayment. Suits one-off gaps with a clear repayment event. Credicorp's Business Bridging Loan is this type.
- Invoice finance. Funding advanced against the value of outstanding invoices — the lender pays a portion of the invoice value upfront and recovers it when the debtor pays. Suits companies whose working capital gap is directly caused by slow-paying customers. Credicorp's Slice product is invoice-linked credit of this type.
What causes a working capital gap?
Understanding the cause of the gap helps match it to the right product:
- Payment timing. The company has invoiced customers but not yet been paid — money is owed to the company but hasn't arrived yet. Common in B2B, construction, professional services. Suits invoice finance (Slice) or a revolving facility (Flex).
- Tax or one-off payment. A VAT bill, PAYE run, or insurance renewal falls due before expected inflows arrive. A defined short-term need with a specific amount and repayment date. Suits a bridging loan.
- Seasonal demand. A predictable period of higher cash outflow (stock purchase before peak season, agricultural spend before harvest). The cash out-and-back follows a known pattern. Suits a bridging loan or revolving facility depending on whether the cycle is one-off or recurring.
- Growth capital. Increased orders require upfront stock, labour or delivery costs before the customer pays. Often recurring as the business grows. Suits a revolving facility — draw for each batch, repay when customer pays.
How to identify and close a working capital gap
- Calculate the current working capital position. Take current assets (cash + debtors + stock) minus current liabilities (creditors due within 30 days + scheduled repayments). If the result is negative, note the size of the gap and when it peaks — this sets how much to borrow and for how long.
- Identify what is causing the gap. Timing gap (invoices out, not yet in): revolving facility or invoice finance. One-off payment: bridging loan. Seasonal cycle: bridging loan or revolving facility. Ongoing growth: revolving facility. Matching the cause to the product avoids borrowing more than needed or choosing a product that doesn't fit the repayment profile.
- Choose the right product. For a specific, short-term lump-sum need: Credicorp Business Bridging Loan (£50–£500, 14–84 days). For recurring draw-and-repay needs: Credicorp Flex revolving credit facility. For invoice-backed gaps: Credicorp Slice. All three: no personal guarantee, lends to the company.
- Apply at credicorp.co.uk with the company's bank statements ready. Credicorp uses Open Banking to read the company's banking history as part of its affordability assessment. Trading through a dedicated business bank account for at least 3 months, with Companies House filings current, supports a fast decision. Apply at credicorp.co.uk — this site is the brand front door and does not take applications.
Working capital finance questions
What is working capital?
Working capital is the money a business has available for day-to-day operations: current assets (cash, debtors, stock) minus current liabilities (creditors, short-term debt). A company with positive working capital can meet its obligations as they fall due. A company with negative working capital cannot — it is drawing on reserves, borrowing, or failing to pay on time. Working capital is not profit; a highly profitable company can run out of working capital if its cash is tied up in unpaid invoices or stock.
What types of working capital finance are available?
The main types are: (1) Business overdraft — a flexible buffer attached to the company's bank account, but usually requires an established banking relationship and can be withdrawn at short notice. (2) Revolving credit facility — a pre-agreed credit limit from a specialist lender that the company draws and repays as needed; Credicorp's Flex product is this type. (3) Short-term bridging loan — a lump sum for a specific, short-term need, repaid in full at a set date; Credicorp's Business Bridging Loan is this type. (4) Invoice finance — funding advanced against outstanding invoices; Credicorp's Slice product is this type. Each has different speeds, costs, and eligibility criteria.
Is a business bridging loan the same as working capital finance?
A business bridging loan is a type of working capital finance — specifically for a short, defined period where a lump sum is needed and the company knows when it will be repaid. It works well for: bridging a gap between a VAT payment date and incoming receipts; covering a predictable seasonal shortfall; funding stock ahead of a large order. It is not suited to ongoing, open-ended working capital needs, which are better covered by a revolving credit facility.
How is Credicorp's working capital finance different from a bank overdraft?
The main differences are: (1) Speed — Credicorp's assessment is same-day; a bank overdraft typically takes weeks to arrange and requires an established account. (2) No personal guarantee — Credicorp lends to the company; a bank overdraft usually requires a personal guarantee from the director. (3) Accessibility — Credicorp does not require a pre-existing relationship with the company; the bank does. (4) Pricing — Credicorp charges a transparent daily rate (0.25%/day); overdraft rates vary and can include arrangement fees, annual review fees and unused facility charges.
How quickly can a company access working capital finance?
This depends on the product type. Credicorp's Business Bridging Loan and Flex facility decisions are typically same working day, with funds transferred promptly after. A bank overdraft requires an established relationship and usually several weeks of assessment. Invoice finance providers vary — 24-48 hours is common once the facility is in place. For an urgent working capital need, a specialist short-term lender is generally faster than a bank.
Related guides
For the difference between a lump-sum loan and a revolving facility, read a loan or a facility. For how the company's cash flow gap arises in practice, read the cash-flow gap, explained. For how Credicorp's affordability assessment works, read how affordability is assessed. All the guides are on the Learn hub.
Fill the gap. Keep trading.
Same-day decisions. No personal guarantee. The company borrows, never you.