Working Capital:
Frequently Asked Questions

Working capital represents the operational liquidity of your business, calculated by subtracting current liabilities from current assets.

Working Capital= Current Assets − Current Liabilities

Here’s what each component means:

1. Current Assets: These are assets that a company expects to convert into cash within one year. They include items such as cash and cash equivalents, accounts receivable, inventory, and other short-term investments.

2. Current Liabilities: These are the company’s debts or obligations that are due within one year. They include items such as accounts payable, short-term loans, taxes payable, and other short-term debts.

Positive working capital indicates that a company can pay off its short-term liabilities with its short-term assets. A negative working capital suggests that a company might have trouble meeting its short-term obligations.

It’s crucial because it ensures you have enough funds to cover day-to-day expenses, invest in growth opportunities, and handle unforeseen financial challenges. Adequate working capital enables your business to run smoothly and seize opportunities for expansion, while insufficient working capital can lead to cash flow problems and hinder growth prospects. Look for working capital funding solutions that are designed to help you maintain a healthy balance and optimize your business operations.

The financing for working capital can come from various sources, and they are primarily short-term in nature. Types of working capital financing include:

• Factoring or Accounts Receivable Financing: This involves selling your invoices or receivables at a discount to a third party (a factor). The company gets immediate cash, while the factor will collect the full amount from the customer when it’s due.
• Purchase Order (PO) Financing: This type of financing is used when a company receives a large order but doesn’t have the necessary funds to fulfill it. A financing company pays the supplier directly, and after the order is fulfilled and the customer has paid for it, the financing company is paid back.
• Merchant Cash Advance (MCA): Businesses that have a consistent volume of credit card sales can receive an advance on future sales. They then repay the advance plus fees from their daily credit card revenue.
• Inventory Financing: Short-term loans or lines of credit used by a company to purchase inventory. The inventory itself serves as collateral for the loan.
• Trade Credit: This credit is often used by suppliers and distributors. When a company purchases goods and agrees to pay the supplier at a later date (e.g., within 30, 60, or 90 days), it is using trade credit. This is a very common form of short-term working capital financing.
• Line of Credit: This is an arrangement with a bank or financial institution where the lender agrees to lend a company up to a specified amount of money for working capital needs. The company can draw from this line as needed and will pay interest on the amount drawn.
• Bank Overdraft: This facility allows businesses to withdraw more money from their bank accounts than they have. It provides immediate funds for working capital, but it typically comes with higher interest rates than other forms of financing.
• Short-Term Loans: Banks and financial institutions offer short-term loans to businesses that need funds for a short period of time. These loans are generally repayable within a year.
• Commercial Paper: This is an unsecured short-term debt instrument issued by companies to finance their immediate cash needs. Typically, only companies with high credit ratings issue commercial papers.
• Revolving Credit Facilities: An agreed-upon amount of money that businesses can borrow, repay, and borrow again.
• Invoice Discounting: Using unpaid invoices as collateral for a loan.
• Supply Chain Financing: A set of solutions that improve cash flow by allowing businesses to extend their payment terms with suppliers.
• Peer-to-Peer Business Lending: Borrowing from individual investors online.
• Bridge Loans: Short-term loans that “bridge” the gap between immediate financing needs and long-term solutions.
• SBA Loans: Loans guaranteed by the U.S. Small Business Administration for small businesses.
• Microloans: Small, short-term loans tailored for startups and small businesses.

Eligibility for working capital depends on the type of working capital financing and other factors like your business’s financial health (revenue, other debts, MCAs, and credit history). To get a precise answer, please apply and provide your business details, and our team will assess your qualifications.

Once approved, funds can usually be transferred to your account the same day. The exact timing may vary based on the time of day you apply, your bank, and upon completion of a funding call. Once you apply, we will follow up and give you a realistic time frame

We believe in transparency. All fees associated with our working capital offerings are clearly outlined in your agreement. There are no hidden fees.

Yes, you can repay the working capital early. Depending on the terms of your agreement, early repayment might even save you money on the cost of capital.

Repayment may be structured as:

• Daily or weekly remittances
• Fixed payments over a short term
• Revenue-based payments in certain cases

Your full repayment schedule is disclosed before you accept the offer.