When does a line of credit fit?
For recurring, short gaps, like a payroll that falls before a big weekend settles. You draw, repay a few days later, and draw again.
Lines usually require stronger credit and history. Some charge fees on the full line even when unused. Read terms carefully.
When does working capital fit?
For a defined gap with a clear end, like a slow season, a temporary closure or a one-time event. The lump sum covers the gap and payments follow.
Working capital is often easier to qualify for with lower credit or a shorter history. The total cost is fixed upfront.
Ask about renewal and annual review terms on a line. Some lines can be reduced or closed after a weak year, just when you need them. Working capital does not depend on an annual review once funded.
Can I use both?
Some restaurants keep a small line for weekly timing and use working capital for seasonal gaps. Disclose all financing when applying.
Keep combined payments well within your slowest month’s deposits.
| Feature | Line of credit | Working capital |
|---|---|---|
| Access | Draw as needed | Lump sum |
| Cost | On amount used | Fixed total |
| Qualifying | Usually stricter | Often more flexible |
| Best for | Recurring short gaps | Defined one-time gaps |
Worked example: a defined three-month gap
A restaurant averaging $98,000 in monthly deposits faces a three-month gap while a nearby office building is renovated, and chooses $20,000 in working capital instead of a line it does not yet qualify for. Using an illustrative factor rate of 1.20, $20,000 would mean $24,000 repaid over roughly 5 months: 105 daily payments of about $229.
That works out to about $4,800 a month, or 4.9% of the $98,000 this business deposits monthly, and the total cost of the money is $4,000. When the building reopens, lunch traffic returns and the payments end soon after.
For comparison, repaying the same $24,000 over 3 months would lift the monthly outlay to about $8,000, or 8.2% of deposits, and a shorter term can come with a lower factor rate, so comparing both versions side by side is worthwhile.
| Average monthly deposits | $98,000 |
|---|---|
| Amount funded | $20,000 |
| Factor rate (illustrative) | 1.20 |
| Total repaid | $24,000 |
| Cost of the funding | $4,000 |
| Term | about 5 months |
| Daily payment (105 payments) | $229 |
| Payments as a share of deposits | 4.9% |
Who working capital fits
Usually a fit
- Restaurants with a defined gap
- Owners who do not yet qualify for a line
- Operators who want a fixed total cost
When another route makes more sense
- Restaurants with recurring weekly timing gaps and a line available
- Owners with reserves
- New restaurants without deposits
What you’ll typically need
- Recent business bank statements
- Business details
Frequently asked questions
Is a line cheaper?
Often, if you qualify and use it briefly.
Can I get a line with lower credit?
It can be harder; working capital may be easier.
If I apply today for a defined payroll gap, when could funds land?
With statements ready, a restaurant owner applying for a defined payroll gap typically hears back the same day, and approved funds tend to arrive in one to two business days.
Does a 500 credit score rule me out for a defined payroll gap?
No. Applicants from 500 can be reviewed for a defined payroll gap; the deposit history does most of the work, and better credit typically improves the terms you are offered.
Comparing options?
Apply and see your offer.
Updated October 6, 2026