All You Need to Know About How Working Capital Can Work for Your Business 1

All You Need to Know About How Working Capital Can Work for Your Business

Whether you want to expand your business or start a new venture, you will require working capital. Working capital is an indicator for measuring your business’s financial health and well-being. A financially sound company demonstrates that its existing assets are higher than its current liabilities. Current investments involve liquid assets such as account receivables and cash, while current liabilities are obligations and debts due in a year. Sufficient working capital assists companies in balancing profitability and liquidity while focusing on consistent and continuous growth.

Effective operational capital management is essential for companies to perform their daily operations smoothly, scale, and survive in the long term. There are various ways to avail working capital: inventory management, accelerating customer collection, and optimizing supplier payments. An alternative solution to fund working capital is to help with a working capital loan for a new business.

What Is Working Capital? Here's Everything You Need to Know | FreshBooks Blog

Here are five ways how working capital can work well for your business:

Whether an established enterprise or a startup, both come with highs and lows; however, optimizing working capital is crucial for companies to thrive in such an environment. Maintaining a steady liquidity flow ensures high sustainability and can mitigate basic needs like holding necessary inventory and paying rent, salaries, mortgage payments, and utilities on time. Thus, working capital facilitates you with perpetual access to capital and assists in optimizing cash flows.

  • Capitalize seasonal swings

Various businesses are cyclical, where the company may double in specific months like festive times or seasons. While businesses are eager to capitalize on such seasonal upswings, they are always worried about a working capital crunch, which prevents them from taking big orders. Working capital can assist in bridging this gap and equipping the company to leverage the enhancement in demands with zero stress on financials.

  • Improve creditworthiness

Financiers look at your working capital balance to know your company’s financial health. Maintaining solid credibility opens access to higher funding at better rates through business loans.

  • Navigate crisis

Every company has its risks. Working capital funds can help navigate the crisis by offering sufficient cushion to effectively manage necessary expenses to keep up with the business.

  • Facilitate growth

Access to working capital helps you to scale up your company as per its potential while catering to no room for error or any mistake. CIn addition, it ensures accurate financial forecasting that allows you to make an informed decision to accelerate your company’s growth. Companies with adequate working capital have complete freedom to take huge customer orders with zero impact on their current capabilities to meet demands.


Maintaining adequate working capital assists you in easily meeting your daily business operations. Moreover, access to sufficient loans like working capital provides an avenue to scale and grow your business as per its potential.

Ricardo L. Dominguez

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