Why Working Capital is Like Air For Your Business
Working capital is like air for your business. It’s that life-giving force that sustains and drives. Without it, your business can’t function. But very often, small businesses find themselves panting along, gasping for air. So how do you get more of that working capital that will help your business breathe?
What is Working Capital?
This is the amount of air available for you to breath in and out. It is the cash-on-hand, which is used by the business in its day-to-day trade and operations. Working capital is calculated as the current assets minus the current liabilities. Ensuring you have enough cash-on-hand to take on any business-enhancing opportunities is key to your business’s success. It is what ensures a healthy business. And business health equals growth.
What is Working Capital best for?
Well, the day-to-day dealings. Cash-on-hand can assist with buying stock, paying salaries, utilities and even refurbishing your store. Perhaps you are short-handed and need to hire new staff. If your equipment needs to be upgraded or you have a great idea to expand your offering, you need available funds. Each of these requires cash to action. Buying on credit (where possible) can send your business into unnecessary debt. Putting you under pressure and impinging on plans. Nobody likes having to breathe into a brown bag to catch your breath. Cash-on-hand is the big stress reliever for any business.
How can I manage my Working Capital?
Always handle your own oxygen tank. If you went deep-sea diving you wouldn’t rely on your buddy to fill your tank with that trusty O2, would you? Your business is the same. Even if you have an accountant managing your books, you should be there too. Ultimately you are the boss of your business, and how it inhales and exhales its assets and liabilities on a daily basis, is ultimately your responsibility.
What if I run out of Working Capital?
Luckily there are options. Funding partners are out there ready to throw you a raft so you can come up for air. Trusted lenders like Merchant Capital can provide funding options that are tailor-made to work in line with retail operations. Helping you breathe easy and plan for the long term.
What’s the best way to use a Working Capital loan?
While it may be tempting to use your funding line to plug holes, make sure this is really where the air is escaping. While Merchant Capital doesn’t prescribe the use of funds, the best way to utilize working capital is by investing it in business enhancing opportunities. This decreases your liabilities and allows unimpeded expansion of your store, offerings, products etc. Further to this, short-term finance should be used for short-term projects. A renovation or stock purchase that takes a few weeks should not be paid off over a long term. This can (once again) only tighten its grip on your air supply at a later date.
Supply of the good stuff comes down to a few simple concepts: Managing your money matters. Knowing how to spend. But then it’s also about knowing when to ask for help. Want to enquire about filling up your business’s tank? Contact Merchant Capital today. Exhale.