How Companies can Increase Their Working Capital and How Capital Finance Contribute in It


A working capital is the money that a company needs to run its day to day operations. The higher working capital the company has, the greater its efficiency since it proves that the company has a good balance between the inflow and outflow.

In other words, working capital is equal to current assets of the company, minus the current liabilities. The current liabilities include any amount that is to be paid to the creditor in less than a year. It is a great way to measure the short term financial health of the company. It includes cash, which is foreign currency as well.

Tips to Increase Working Capital

Here are some working capital management tips for those who want to increase their working capital.
One could increase the working capital by opting for business contract loans. They are also known as agreement loans and they provide businesses money against the value of future contract guarantees. One could enjoy a completely non- credit based loan process and the money is unrestricted which offers great flexibility for the money being used in all aspects of business. This is mainly done in the construction sector or other sectors where industrial contracts are prevalent.
1- One could also opt for business cash advances which are based on business cash flow and merchant cash advances. In this case, there is no need for a loan application and the money is made available in a week or less.
2- One effective working capital management tip is to ensure that one always has a reserve that one could fall back on in times of need. To manage this, there should be a clear idea also for the investments that cannot be liquidated.
3- One should also be taking into account prepaid expenses, and the accounts have to be receivable as well. An idea on inventory and how much they already have in reserve which is ready to be supplied in case a bulk order comes will also help the most.
4- One could also opt for equipment leasing and this is a great option for companies of all sizes. With this method, the creditor pays for the equipment and then leases it to you for an affordable monthly rate. Once the costs are covered, the equipment belongs to the owner. This is frequently done in fields like agriculture, medicine, mining, drilling and manufacturing.
How Working Capital Loans are Helpful

The loan can be utilized to take care of a host of business requirements, even if one is slightly short of cash. Be it maintaining inventory or paying the salary of employees, there is no need to worry anymore.

The loan for business can be taken for a period of 12 months as well and the interest is mostly between 16% and 35%.
The loan can be applied by any business and there are also special schemes in place for SMEs and MSMEs. Many businesses have prospered over the years because they have been benefited by the flexible schemes of Financial Firms.

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