What is working capital?
Simply put, working capital is funds available to the business for day-to-day use. It is the excess of current assets over current liabilities. A positive working capital reflects the ability of a company to pay off short-term debt. Some businesses cannot cover their regular operations without additional working capital obtained through funding options.
Ways to build a good amount of working capital
A few lucky entrepreneurs are financially stable. They have savings and sales to cover their expenses. Others, however, will need some help to get the business running. The financial backing can come from a variety of courses.
Regardless of the situation, businesses may need to increase their capital during certain circumstances. Some companies will use working capital to expand their business by hiring new employees, increasing their inventory, or investing in technological advances. Others will use the loan to prepare for an upcoming busy season.
How strong is your working capital?
As Entrepreneur suggests, a company can calculate its operating cycle and use that information to analyse its financial needs. The time elapsed during the accounts receivable and the inventory cycle is compared to the length of the accounts payable cycle. A lower working capital during the first two cycles could prompt a business to look at financing options.
Does the Business Need a Loan or a Cash Advance?
Loans and cash advances are the two primary funding options. Each has its advantages and disadvantages, and each can be procured from several establishments. Below is a summary of each option.
Loans
- Legally binding
- May be dependent on credit history
- Possibility of low-interest rates
- Can be approved and funded quickly
- No hidden fees
Before signing for a loan, the business owner must be eligible for it. The requirements vary by lender, but they are essentially verifying that the owner will repay the loan on time.
Cash Advances
- Less regulated than loans
- Offered by non-banking corporations
- May be easier to obtain for new businesses
- Different payback system than loans
- May have high-interest rates
- Can be approved and funded quickly
- May have hidden fees
Look out for the funding options at Capital Float
The size of your company and eligibility
Capital Float will accept businesses that are as young as one year old, granted they have an annual turnover of 25,00,000 rupees and are based in India. Loans begin at 1,00,000 rupees, go to up to 1,00,00,000 rupees for online sellers, and are capped at 50,00,00,000 rupees for larger businesses. Interest rates can be as low as 18{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616}, and funding can be approved in one week.
How much of your inventory can be financed?
Inventory financing is available for companies that have been running for two years with an annual turnover of 1,00,00,000 rupees. Up to 80{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} of the invoice value can be loaned. The loan can be repaid in one payment, or over the course of up to 180 days.
Cash advance for your business needs
Additionally, cash advances are distributed to companies with annual turnovers of 20,00,000 rupees, when 12,00,000 of that is done by credit card. The loan can be between 50{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} and 150{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} of the applicant’s monthly credit card volume, repayable in up to one year.
Managing the Cash Flow for Improved Sales
When sales are going well, and expenses are being covered, the business has a positive cash flow. This is the desired flow for a company. Having a negative cash flow means that the business is spending more than it can repay, and this is risky behaviour.
Factors affecting working capital
Working capital management is essential for the business to run smoothly. To properly manage the cash flow, factors like accounts receivable, inventory, and accounts payable need to be considered in addition to the profit or loss of the company. Generally speaking, a positive cash flow means the business is profitable. A low inventory level frees up working capital for other uses. Sending out invoices promptly will speed up customer payments.
Identify difficulties and resolve problems in time
Having a cash flow spreadsheet allows the owner to quickly identify challenges that may be faced, such as unexpected large orders, cancelled orders, or late payments. When the repercussions are shown with numerical values, plans can be made in anticipation of those events.
As business owners learn to control their cash flow, working capital will be more readily available, and funding options will not be required as often.
Primary keyword: Working capital
LSI keywords:
Variants: additional working capital, lower working capital, working capital management, positive working capital
Antonyms and synonyms: cash flow, financing options, funding options, financial backing, regular operations, operating cycle, financial needs, inventory financing
https://www.kabbage.com/blog/merchant-cash-advances/
https://www.entrepreneur.com/article/225658
http://fitsmallbusiness.com/working-capital/
http://www.profitbooks.net/manage-cash-flow-small-business/
