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Getting working capital

The amount of working capital available to your company is one of the most useful and common measures of the financial health of any business.

The website Informi reminds us that working capital is simply defined as the current assets of your company minus its current assets – where:

  • the current assets are made up of cash and debts owed to you which you may convert into cash within the next year; and
  • current liabilities are the debts owed by your company and also due for payment within one year.

Working capital therefore represents your company’s ability to meet its short-term financial obligations. Clearly, if current assets minus current liabilities results in a positive figure, trading may proceed as normal; if the result is negative, however, you may be unable to meet the debts as they fall due – and if this continues for any length of time, the company may be declared insolvent.

Getting working capital

Temporary shortfalls in working capital are not at all uncommon and may arise for any number of reasons – your creditors may be unusually slow in paying you, or you might have taken on inescapable but unexpected debts in ordering supplies and materials, installing new plant or equipment, or by seizing a new business opportunity that was too good to miss.

In short, you might need to get further working capital – and at short notice.

Business loans

One of the most simple and straight forward way of getting the working capital you need is to arrange a business loan.

A new breed of lenders makes this especially convenient, quick and easy by arranging business loans online.

You may make an initial enquiry about the working capital business loan you need to borrow and receive a decision in principle practically straight away – no more than a minute or two. If you are satisfied with the offer, you make a formal application for consideration by the lender and if this is successful, the requested finance to bolster your working capital is transferred directly to your company bank account – with some business finance providers, this can be as quick as within 48 hours or so.

Balance sheet lenders in particular – and probably more so than the alternative peer-to-peer lenders – are likely to have a keen sense of what it takes to run a business such as yours and to work with you to ensure that your repayments of the loan match your cashflow capabilities. It is an understanding which helps to avoid the need for complicated business plans and detailed cashflow projections that any conventional bank is likely to ask for if you apply there for any loan.

Lenders in this sector of the market are also likely to prove more flexible when it comes to your managing any temporary hitch in your scheduled repayments. Provided you keep them fully informed and completely in the picture about missing a payment, for example, it may be possible to extend your repayment schedule without incurring any financial penalty.

Similarly, if your working capital shortfall is resolved more quickly than you imagined, and you choose to repay the business loan ahead of schedule, this may also be done without any penalty.

These unsecured, fixed rate business loans are typically available from £5,000 to £100,000, with repayments scheduled from 3 to 12 months – thus avoiding any long-term accumulation of interest charges.