Generate Working Capital To Drive Business Growth and Success!
by Arnab Dey Business Development 12 April 2023
Every business needs capital to succeed.
This could come in the form of money invested into the business or tangible long-term assets acquired by the business. However, regardless of the amount of capital a business has, no business can thrive without sufficient working capital.
Working capital is the measure of a business’s liquidity. It is the difference gotten from deducting the current liabilities of a company from its current assets.
Current assets are extremely liquid assets that can be converted into cash. In comparison, current liabilities are the sum of amounts due to be paid within a year, like debts, accounts payable, bank overdrafts, outstanding expenses, etc.
The more the working capital of a business, the better its short-term financial health. Inferentially, working capital is money used to fund a business’s short-term financial obligations, like paying taxes and paying employees. Positive working capital gives business owners leverage and makes it easy to procure business loans.
Sources of Working Capital
The two primary sources of working capital include; internal and external sources. However, these sources can be subdivided into three categories;
- Short-term sources; include tax provisions, cash credits, public deposits, short-term loans, bill discounting, bank overdrafts, etc.
- Long-term sources; include equities, debentures, long-term loans, retained profits, share capital, provision for depreciation, etc.
- Spontaneous sources; include funds a business generates from its normal daily activities. They include bills payable, trade credit, accrued expenses, notes payable, and sundry creditors.
Because small businesses lack the credit history limit required to source working capital, most of these options are not favorable.
The only options available to them are;
- Vendor financing and trade credit
- Working capital loans from Non-Bank Financial Institutions like VIP Capital Funding
How to Generate Working Capital
Unfortunately, most small businesses have not cracked the secret of generating the working capital they need to keep their operations running smoothly.
While big firms have a long list of options for generating working capital, the list for small businesses is relatively short.
Some financing strategies that work for small businesses include;
- Purchase Order Financing: When businesses get large purchase orders but lack the financial resources to fulfill them, they turn to third-party lenders for capital.
- Accounts Receivable Factoring; Here, businesses sell their invoices to third-party companies and get paid. It is a way of converting their outstanding invoices to cash. This comes in handy when the business needs urgent cash flow or when customers take a long time to pay.
- Equipment Financing; This option allows businesses to purchase new or used equipment through sourced finance. It helps them conserve their cash flow while still acquiring the equipment necessary to run the business.
VIP Capital Funding offers all these options and more. With flexible financing options, a streamlined application process, and fast funding turnaround time, generating working capital for your business is simple and easy.
Work with VIP Capital Funding, and stand a chance of getting $50K-$15MM in fast working capital to drive growth and success!
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