Why Your Business Needs Working Capital
Working capital is the lifeblood of your business. Having cash on hand lets you pay the bills, pay your employees and invest in your company. What is it?
Capital refers to the money you have in your possession that you can use immediately. It’s different from applying for a loan because these applications can take weeks or months to complete. It’s also different than total sales. You may have a number of invoices, but they don’t become capital until you get paid after 30 or 60 days.
The Importance of Working Capital for Healthy Businesses
Commerce is always in motion. Some months you may have strong sales that provide lots of capital. Other times of year are typically slower for many businesses and industries. Even shopping centers see these cycles of cash flow. January and February frequently have far lower sales than months such as November and December.
Seasonal businesses notice these effects even more. Lawn companies, for example, may have to service the majority of their customers in spring, fall and summer months. Over the winter, a business may slow down significantly. How can owners meet their financial needs during periods of slower growth? That’s where capital financing comes in.
You can purchase inventory, pay the bills, meet rent payments, take care of taxes and keep up with other financial obligations to keep the lights on in your business. Instant financing is also important for business growth. Even when you have a solid cash flow, it’s not enough to simply cover your expenses and take home some profit. To keep your company healthy, you need cash to reinvest into business operations. This allows you to pay for marketing services, upgrade older equipment, hire more employees or take other steps to make your company a place where customers love to shop.
Practical Working Capital Solutions
There are several options for business owners looking to bolster their capital. One great solution is to open a business line of credit from a friendly lender. Lines of credit work similar to a credit card, but with better interest rates. You can buy what you need, without having to request approval, and then pay the amount back over time.
The Small Business Administration also provides short-term financing options for companies that meet government criteria. These can be used to finance larger purchases, such as real estate costs, new equipment, and company vehicles.
Just like how your body’s cells need oxygen to survive and work efficiently, every company needs capital to operate day in and day out. With immediate access to capital from a trustworthy lender, your company can weather financial emergencies without problems.