Start with the gap, not the product
Every working capital problem has a shape. Recurring and breathing - up one month, down the next? Growing with sales - the faster you sell, the tighter cash gets? Seasonal - one buying peak funding one selling season? One-off - a single event (tax bill, contract mobilisation, repair) that normal trading will absorb? Each shape has a facility built for it, and the most expensive funding mistakes are shape mismatches: term money for breathing needs, revolving money for permanent needs.
Working capital finance options UK - the full menu mapped
Revolving credit facility - for breathing needs
Draw, repay, redraw against a committed limit, paying interest only on funds out (8–15% in 2026). The default for irregular, recurring gaps - full mechanics in our guide to the revolving credit facility explained UK.
Invoice finance - for ledger-trapped cash
Advances 80–90% of invoices within 48 hours, scaling automatically with sales - the answer when the gap grows because the business grows. Costs typically 1–3% of funded turnover via invoice finance.
Short term funding for business UK - for one-off events
Short term funding for business UK lenders provide - 3 to 24 month loans, decisions in 24–72 hours - suits single absorbable events: the VAT quarter that landed with the refit, mobilising a won contract, a one-time stock opportunity. Short term facilities price at 1–2.5% per month equivalent; the discipline is that the event genuinely be one-off.
Merchant cash advance - for card-revenue trades
An advance repaid as a fixed percentage of daily card takings - hospitality and retail’s revenue-linked option, priced at factor rates of 1.1–1.5 (merchant cash advance).
Trade and stock facilities - for the purchase-to-sale cycle
Supplier payment and stock funding repaid as goods sell - the importer’s and wholesaler’s tool, typically 0.75–1.5% per month on trade finance transactions.
Overdraft - for small daily timing
Still the right tool for small, integrated, day-to-day swings - where a bank will still grant one at meaningful size.
Cash flow finance UK - the diagnostic in five questions
Cash flow finance UK decisions resolve quickly once five questions are answered honestly - the answers map directly onto the menu above.
The five-question diagnostic:
- Does the gap recur? Recurring → RCF or invoice finance; one-off → short term loan
- Does it grow with sales? Yes → invoice finance - the only option that scales automatically
- Is revenue card-based? Yes → MCA joins the comparison; no → it leaves it
- Is stock the cash consumer? Yes → trade and stock facilities fund the cycle itself
- Is the need actually permanent? Yes → none of the above: permanent capital wants term debt or equity, not working capital tools
Cash flow finance UK - recurrence, growth-linkage, revenue type, stock intensity, and permanence pick the tool in five questions.
Business liquidity solutions UK - building the stack
Mature businesses rarely run one facility - they run business liquidity solutions UK stacks: a card programme capturing 56 days of free float on routine spend, an RCF for the breathing layer, invoice or trade finance carrying the volume-linked layer, and short-term capacity held in reserve for events. Each pound of need sits in its cheapest suitable home, and no facility is stretched into a shape it was not built for. The stack also compounds at review: conduct on each facility strengthens the pricing of the next.
2026 pricing summary - and the true comparison
- RCF: 8–15% annually on drawn funds + 0.5–2% commitment fee
- Invoice finance: 1–3% of funded turnover all-in
- Short term loans: 1–2.5% per month equivalent
- MCA: factor rates 1.1–1.5 (effective APR set by repayment speed)
- Trade facilities: 0.75–1.5% per month on funds in use
- The comparison that matters: annual cost at your usage pattern against the margin the funding protects or earns - never headline rate against headline rate
The review habit that keeps the stack cheap
Working capital pricing is not static: facilities priced at year one’s risk keep charging it in year three unless challenged. Diary a whole-stack review every 12–18 months - conduct on each facility is repricing evidence for all of them, advance rates on invoice facilities drift up as ledgers mature, and RCF limits grow on clean touch-zero records. Businesses that never review pay the loyalty tax; businesses that market-test annually compound the savings into margin. The review costs an afternoon; the drift costs percentage points.
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