Your working capital balance is a vital indicator of the day to day health of your company. Simply expressed – in a definition suggested the credit reference agency Experian – working capital is the balance of your current assets, less your current liabilities.
Your current assets are liquid assets – that is to say, cash itself and assets which may be converted into cash within a reasonably short space of time.
Your business needs that positive working capital balance to meet its day to day obligations and to continue trading. If you are keeping too much working capital, however, you are failing to make the most of the company’s potential for longer-term investment and growth. In short, therefore, maintaining the appropriate level of working balance may come for a careful balance and some very fine tuning.
The real world
When that fine tuning comes up against the real world of fast-moving events and opportunities, however, your carefully balanced level of working capital might be thrown askew.
You need your working capital, for example to respond to:
- business opportunities that are too good to miss;
- the need to respond by diversifying into new markets;
- carry out advertising and marketing campaigns in response to those opportunities;
- buy in new stock and materials;
- re-equip your production processes; and
- plug any temporary gaps that might be created in your cashflow.
That need to find additional working capital – and to find it fast – may be met by borrowing. Short-term business loans may prove ideal for fixing a temporary imbalance in your working capital while providing the additional finance your business needs to meet the challenges arising in a fast-moving business world.
If your working capital is already well-managed, you may not need much of an additional injection of funds in order to meet the challenges ahead. Anything between £15,000 and £100,000 may be available from specialists in this type of lending.
Many of them also operate entirely online – but also have communications via telephone and email – so enquiries and formal applications may be made as seamlessly and as quickly as possible.
Often, for example, the lender is able to give you a decision in principle on your proposed borrowing within just a minute or two. This is followed by your formal application – during which the obligatory credit checks and assessment of the financial standing of your company are made – and, if that is also approved, the requested funds are sometimes transferred electronically, directly to your company bank account within 48 hours or so.
Since these are typically unsecured business loans, no company or personal assets are at risk – in the event of your defaulting on repayments, although you need to avoid such an occurrence for fear of adversely affecting your credit rating and, so, making it more difficult to obtain credit or other borrowing in the future.
Because the rate of interest is also normally fixed throughout the short-term borrowing of usually between three and 12 months, you know exactly the cost of credit and may budget for the equal monthly repayment instalments with minimum impact on your cashflow.