Working capital is the lifeblood of any business
Working capital is the lifeblood of any business. Not having it can be deadly and having it will not only keep you alive but also give you the opportunity to grow. However, working capital isn't a topic you'll find on many blogs or in business books because it's something that most people don't like talking about. But why do businesses need working capital? And what can they do to manage their working capital effectively? Let's talk about that!
What is working capital? The first rule of working capital is: You do not talk about working capital.
If you've ever heard the term "working capital," it's likely from one of two places:
You're a finance professional who uses the term in your everyday work, or
You're an aspiring entrepreneur who Googled "working capital" because you want to know what it is, and why it's so important to your business—or both.
The Working Capital Cycle
Working capital is the difference between your assets and liabilities. It's the best indicator of how much money you have to run your business at any given time, and it's likely that you're not maximizing its usefulness.
A company without working capital is like a person without a bank account: You can't make any purchases, pay any bills, or invest in new opportunities until someone comes along with some cash for you. That's a problem for both businesses and individuals; but while personal finances are more flexible (not everyone needs to pay rent), business owners must be able to meet their obligations regardless of whether they have enough cash on hand or not—or risk bankruptcy or closure.
How to manage working capital effectively
You need to do two things:
Manage your working capital well, so that you have enough of it at all times.
Make sure your business needs the right types of working capital to get the job done.
Why businesses need working capital finance
Working capital finance is the lifeblood of any business. It's the cash you need to fund your business, whether that be through investing in new equipment, expanding into a new market, or simply paying your staff.
If you're having trouble raising working capital finance from traditional sources, we can help! We offer competitive rates and flexible repayment structures – so you can make use of your money when it's needed the most.
So, should you get a loan?
If you need working capital and are in the market for a loan, there is no better option than a line of credit. If you have working capital but do not need to take out a loan, this article has been useful in showing you why it's important to have cash on hand at all times.
Finally, if you don’t need working capital or any other type of funding right now but want one later down the road (it happens), then I hope this article has helped give some insight on how best to approach your financing options should that time come!
So, do you have enough working capital? The answer to this question should always be yes. Don’t let a lack of cash stop your business from growing and expanding into new opportunities. If you find yourself in need of some extra money but are unsure how to get it, contact us today by the click here so we can help!