According to the Cambridge Advanced Learner’s Dictionary, business working capital is the money a company has that is available for immediate business use, rather than the money it has in property and other investments. According to a definition from Charles Sturt University, working capital is essentially current assets minus current liabilities.
Uses of Working Capital
Working capital financing gives you the opportunity to get the cash you want now so you can take care of the immediate needs of your business. You can use the working capital to replenish your inventory; buy fixtures, furniture or other equipment; construct, renovate or improve your leasehold; or as a down payment for the purchase of your business real estate. You can also use it for daily operations – apart from paying your salary!
You can use a variety of methods to secure working capital loans. For instance, you can lease your equipment to a company selling the items you need in your business. Alternatively, you may use asset-financing, where you secure a loan pledging assets your business owns. You may also obtain a line of credit.
Disadvantages of Traditional Business Loans
Although many small business owners opt for traditional small business loans, this approach has numerous limitations. It is easier to obtain a loan if you give some security, such as you car or home. The problem with this approach is that you risk losing both your business and the property you pledge as security.
Conventional loans from banks do not give you access to the money you have already repaid, which means you will have no equity. You will tie up the cash you could otherwise use to finance other areas of the business. There are also a lot of restrictions that make it relatively difficult to obtain a loan.
Benefits of Merchant Cash Advance
On the other hand, a merchant cash advance allows you to get the required money fast and without a lot of hurdles. You do not need any collateral or an impressive credit score to qualify. You are also not tied to a set payback timeframe.
The application process is fast and you will get the money you need deposited directly into your account within a matter of days. What’s more, the process allows people who are not eligible for traditional loans to get the working capital they need.
Merchant cash advances are not really working capital loans but cash advances paid against future credit card account receipts. You only repay a small percentage of future credit card sales. The cash advances are repaid via a merchant account (need to know about a merchant account provider).
The working capital for business plays a crucial role in the management of your business. It shows your business is able to take care of its short-term liabilities and debts.
Your business will slow down if it lacks sufficient working capital, which is where we come to your rescue. We help you turn your credit card receipts into the needed working capital. We can also help you conserve your working capital by using your credit card to get the items you need instead of using cash.
It’s also useful to review SBA programs for businesses like yours. Though the SBA’s reach is small, yet it’s a good site to start in your search for funds.
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