Working capital is the dynamic force of your business. This evaluates your capacity to finance your liabilities while setting up ahead for expansion and development of your company. It also identifies the cash shortages and helps you pinpoint where your money is being held back.
Working Capital is often used to assess the long or short-term condition of a business. Current assets consist of cash, investment, inventory, accounts receivable and other liquid assets you can turn to cash immediately. Current liabilities consist of debts and obligations due in less than a year, and they include accounts payable, short-term and long-term debt due within a year.
Preferably, current assets should be greater than current liabilities, this will give a positive working capital calculation. This indicates that the business has the capabilities to meet its short-term responsibilities.
When you have enough working capital, you can utilize it to grow the business rather than just staying behind on your loans and other liabilities. Here are some examples of how you can use working capital in favor of your business.
Being ahead of the inventory before the peak season in your industry.
Allows you to hire and train additional employees in advance before the business picks up
Sometimes taxes can come due at an inconvenient time. Short-term working capital loans help you pay your taxes without exhausting your working capital.
Reasons to Consider Working Capital Loans
In order to survive, every business needs a healthy working capital state. These are some of the benefits of a positive working capital position include:
Reserves to get through economic uncertainties
Ability to expand and develop your business
Being able to invest in a business you can’t pass on
Serves as a cushion for when your company needs a bit of extra cash flow
The indicator of a properly managed business is the working capital calculation. It helps you measure the ability of your enterprise. It’s also used by banks as a deciding factor in giving greater lines of credit to businesses. Working Capital Mistakes to Avoid
Don’t mix-up short-term and longer-term working capital needs. While it can be enticing to use a working capital line of credit to purchase equipment or real estate properties or to hire additional employees, these expenses call for different kinds of financing. If you use your working capital line of credit on these expenses, it might not be available for its intended purpose.
Where to Get Working Capital Loans?
Sals Capital offers multiple lending products to fit your specific business needs. You can consult with their own dedicated funding manager so you can better understand your working capital needs and what steps you may need to prepare for any situation. While you can’t predict everything about running a company, a good working capital can help you manage smoothly today. Visit our website or contact 332-334-1077 for more information.