Accessing Working Capital For Small Business

Working capital is an incredibly important concept to understand when discussing business finance. It is defined as the total current assets available minus the total current liabilities, which further indicates that it is a measure of a company’s short-term liquidity. This makes sense because companies should make sure they can pay their short-term debts even during slow financial periods or tough economic conditions. Without a solid grasp on working capital and its importance, businesses may find themselves in trouble if their expenses outpace their income in any period of time. Monitoring this figure should be high priority for any business and understanding its dynamics will help inform better decision making around money management and strategy.


A small business’s working capital requirements are due to various factors such as industry, seasonality of operations, and expansion plans. However, huge corporations may get by with low capital because they can easily raise funds, whereas smaller enterprises should aim to keep their working capital in the black.

Accessing Working Capital For Small Business

Overestimating working capital can lead to wasteful inventory building, and capital outlays, while underestimating it might disrupt the company’s operational cycle and prevent it from meeting its commitments. Getting a sme working capital loan doesn’t necessarily indicate that a company is failing; such loans can be used for rapid expansion for some businesses. With a working capital loan, businesses have greater financial security and stability which allows them to invest in growth and strengthen their competitive positioning in the market. Overall, this loan provides additional resources that support a business’s operations and help them realize potential opportunities in the future.

Below are some factors SMEs need to consider when deciding how much working capital loan to apply for:

Business Models

Most traditional business loans offered by private lenders will only process a loan application if there is a  detailed business plan. A solid business plan is your company’s road map for the future. With one, it’s easier for a prospective lender to evaluate whether your idea is commercially viable. The nature of the firm’s operations is one of the factor under evaluation when determining working capital. A shorter operational cycle means less working capital is needed for a trading firm or a retail chain.

Business Cycle

When demand surpasses a startup’s capacity to capitalise on the additional business, cash flow problems might arise. Rapid expansion can be facilitated by cash flow loans, which allow startups to make necessary investments in personnel, technology, and infrastructure. The size of a company’s working capital needs depends on how long it takes to run its business. A “production cycle” in manufacturing is the total time spent on each process stage. Your process begins when you buy products or supplies and ends when you collect payment from your customers, depending on the type of business you run.


Business Growth

When a company expands and grows, its working capital needs also rise. While it takes work to draw a direct line between a company’s sales growth and its need for more working capital, a corporation can use its retained profits to fund a moderate sales growth rate. In contrast, a rapidly expanding enterprise will need a much greater infusion of working capital.


Fluctuations in the Seasons

When the economy is booming, businesses need more working capital to accommodate increased demand, production, inventories, and debtors. When demand is low, businesses have fewer inventories to keep up with and fewer debtors. Thus, they need less working capital and ensure that things are made and ready to buy at the right time. Depending on the business cycle, the company will have more or less money to purchase inventory.


So, how do you know how much working capital your business needs? Cash flow needs to be managed with the same care as any other part of a business’s success. It goes up and down, and during the upswing, your company may need help to fulfil all of its commitments. The reason why there are such things as working capital loans is precisely because of this. They make it possible for entrepreneurs to meet financial obligations while keeping their businesses afloat.


Inland Capital Service offers sme working capital to help companies grow and maintain their company. We have built a network of talented consultants who offer holistic, effective solutions for business owners based on our extensive experience in the industry.