It is a type of overdraft limit that is used to fund a company’s daily operational expenses, such as wages, inventory, accounts payable, and other expenses. Working capital loans are meant to ensure that a business has sufficient liquidity to cover its day-to-day operational expenses and continue doing business as normal. The working capital cycle is the process by which a business converts its current assets (such as inventory) into cash. The working capital loan bridges any gaps that may arise during this process.