Does your business meet its working capital requirement? How can you tell? And how can you address it if you discover that you need to?
For any enterprise, the conversion of raw materials into finished goods takes time. Further, drawing revenue from the sales of those goods eats away at a company’s cash flow. But how can an enterprise take care of its daily expenses and other expenditures otherwise?
Firms that are able to do so keep a specific volume of cash or its equivalent readily available for these purposes. This liquid asset is called
However, businesses that have a deficiency of working capital must opt for business loans to ensure smooth running.
How Is Working Capital Calculated?
- Current assets, including cash, accounts receivable, and inventories.
- Current liabilities, including accounts payable and short-term borrowing.
This financial metric measures a company’s short-term financial health. It gives insights as well about its liquidity and operational efficiency.
Does Your Company Meet Its Working Capital Requirement?
The following factors determine whether a company meets its working capital requirement:
1. The Length of Your Operating Cycle
Businesses with long production cycles need more working capital than do businesses with shorter production cycles.
2. The Nature of the Business
Manufacturing businesses cannot obtain revenue instantly from the sale of their goods. Therefore, they need more in the way of working capital. In contrast, retail establishments can sell their goods quickly. This eases their need for a large amount of working capital.
3. The Nature of Your Production Technology
Technology-intensive firms require less working capital than do labor-intensive firms. In both cases, most of the working capital goes toward paying wages and salaries. Moreover, by using the latest technologies at their disposal, these companies are better able escalate production. This helps them to surpass their break-even points quickly.
Seeking Working Capital Financing
Is your company in the unfortunate position of having insufficient working capital? If so, seek out a
This corporate debt ensures smooth functioning by taking care of daily expenses. Your company will no longer be dependent upon on unstable and changeable sales revenues.
The Benefits of Working Capital Loans
With sufficient working capital, your company will benefit in multiple ways:
Better Inventory Management
Easy Debt Financing
This sort of financing doesn’t require firms to provide ownership to lenders. Contrast this with
Maintaining Cash Flow
With working capital financing, you will have steady cash flow. This will help you to maintain stability in your business. In this respect, loans from reliable financial institutions such as Bajaj Finserv can be helpful.
Look to their pre-approved offers on working capital loans and their relatively fast disbursement. In other words, your business will have independence from its financial obligations quickly. Moreover, applicants need to provide only minimal documents and adhere to simple eligibility criteria. In other words, it’s easy to obtain a loan from Bajaj Finserv.
Credit Line Advantages
An End to Cash Flow Problems
A working capital loan can help your business fill the gap between cash inflow and outflow. In short, this loan will supply your business with its
Moreover, with sufficient working capital, your company can overcome its liquidity crisis. It will have a financial cushion and its cash flow problems will become a thing of the past.