At first glance, you may think that a successful business that is managed well would never need to obtain a loan. Even for successful enterprises, that is not always true. In many cases, maintaining a sufficient balance of cash on hand can be difficult. And having sufficient cash available is what working capital is all about.
Working Capital Defined
Working capital is defined as the amount of money available after your business’s current liabilities are subtracted from its current assets. Another way to think of it is that it represents money that remains in a company’s coffers if all its liabilities are paid off. Essentially, it is money that no one else has a claim on.
Ways to Increase Working Capital
Businesses can use several tips and techniques to keep their working capital a positive number. One way is to cut unnecessary expenses. Another way is to raise prices for the goods or services it sells. It may also consider implementing fees in certain situations, such as late payments. Of course, another way would be to obtain a working capital loan to come up with the needed cash.
What is a Working Capital Loan?
In some cases, a business may decide that it is in its best interest to take out a working capital loan. Several types are available, including small business loans, unsecured business loans, and business lines of credit. If your business needs a quick one-time, the addition of capital, say because of an unexpectedly large order that needs fulfilling, then a working capital loan could be just what is needed. Other forms of financing, such as merchant cash advances, may also be helpful. It’s best to try to use some of the tips mentioned earlier first, but if the need for a working capital loan is there, contact Jasema Capital.