Working Capital Financing to Make Your Business Agile
Working capital keeps your business upright when you hit a snag or when the market is not performing as expected. In simple terms, working capital is the cash you need to carry on day-to-day business tasks. It is also calculated by subtracting your current liabilities from your current assets. Falling short on working capital can lead to a loss of flexibility in operations, ultimately leading to reduced credibility with financiers, vendors and customers.
Working capital floating just above the red line is also bad for your enterprise, especially if you own a small business. Because when you are barely managing to survive in the market, you will not be able to take advantage of new business opportunities to expand and grow your company.
However, always keeping sufficient working capital at hand is easier said than done. Small businesses are generally cash-strapped and depend on timely sales and payment of invoices for their working capital. Here, having a clearly defined credit policy can help you out. It will also give you an idea of the customer credit you can afford without draining your working capital.
In this post, we are sharing a few of such simple yet effective measures you can take to keep your small business agile and competitive.
Fast Track your Payment Collections
The best way to keep your working capital funds ready and steady is to ensure that you are collecting your payments the moment they are cleared. Don’t wait till the end of the month to bill your clients, generate your invoices as soon as the goods or services delivery is confirmed. Billing early also ensures early clearance and hence an early top-up of your working capital.
Never Finance Fixed Assets using Working Capital
If you have used up all your cash then your business will look riskier to financial institutions and potential business partners. Financing fixed assets such as equipment with working capital also reduces your daily, weekly or monthly spending threshold. So, instead of depleting your working capital, use long-term loans to pay for financing fixed assets.
Using Asset Refinancing to Generate Working Capital
Asset refinance helps your cash flow by releasing cash against the value of an asset that you already own. You can sell the asset at its current value to a leasing company, which will then lease it back to you for a specific period of time in exchange for rental payments. Furthermore, fixed asset refinancing will also protect your business from asset depreciation.
Apply for a Working Capital Loan
An unsecured working capital loan for small businesses can ease your working capital worries. The logic is simple, to gain profits and business growth you will need to invest more in your small business. A working capital loan for small business allows you to afford the inventory required by your potential clients, thus, helping you turn them into real account receivables.
Working capital loans are also quite easy to secure if your business has a veritable track record. You can even get a working capital loan approval in less than 24 hours and funds transfer within 3 days with certain financial. If you are wondering where can I get a business loan that fast, visit www.lendingkart.com to apply for a business loan.
Lendingkart has an ‘online only’ loan application process and provides small business loans up to ₹1 crore.