How to Find Working Capital and Free up Cash Flow for Your Business

Bad management practices and financing hurdles such as lack of working capital are some of the reasons why small businesses fail. It doesn’t matter if you’re a newbie or a seasoned business owner. You might need to deal with low working capital sooner or later.

The key to solving these issues is learning how to find working capital. It may seem difficult, but you can secure the funding you need to operate your business.

Don’t know where to start? We’ve got you covered. Here’s your guide to several ways you can try to boost your working capital.

Calculate Your Working Capital and Set up a Reserve

Before you pull the trigger, it’s vital to calculate your working capital. It’s as easy as subtracting your current liabilities from your current assets. You should be able to obtain this number by analyzing your company’s balance sheet.

If you don’t know how to, you may consult your accountant. Once you get a hard number, try to set up a reserve. Saving a portion of your profits in a reserve will help you cover equipment upgrades, repairs, and marketing expenses, among other unexpected costs.

Apply for Vendor Credit

More often than not, buying and maintaining inventory puts a dent on your working capital. At first, you might have to pay all your orders in full. However, you can apply for vendor credit with your supplier.

After getting approved, you’ll have 30 days to pay your order in full once the transaction is completed. If you pay it in full before the 30 days lapse, your vendor might give you a discount on your order.

You may think that waiting until your vendor extends credit is the best call. Even so, ask if they extend credit during your first meetings. Some vendors might be open to extending credit from the get-go. 

Consider Your Working Capital Financing Options

Sometimes using your reserve and obtaining vendor credit isn’t enough to increase your operating capital. In this case, you may consider applying for working capital loans. Use this type of financing to take advantage of a short-term investment to boost your profitability or deal with a cash flow emergency.

Before applying for financing, do your homework and search for the best lenders. Take a hard look at their requirements, loan amounts, and terms. Make sure to chat with their representatives and ask any questions you may have before taking the loan. If you need writing help you can use dissertation help and essay writing service for very cheap price.

Sell Equity to Investors

Business owners prefer to maintain their equity. However, you may consider bringing investors on board. You can sell a percentage of equity in your business in exchange for cash to boost your working capital.

If you are the only owner and don’t want to sell equity, you may consider applying for guaranteed debt consolidation loans to get rid of debt. When you repay some of your debt, you can invest some of your capital in your business to boost your working capital.

So You Learned How to Find Working Capital, Now What?

Learning how to find working capital is a must for any business owner. Sometimes high profitability opportunities knock on your door or unforeseen expenses drain your business accounts.

Successful business owners act accordingly to secure funds to improve their cash flow and working capital. If you’re unsure about the best way to improve your business financials, sit down with your accountant to develop the right strategy.

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