4 Sources of Working Capital

Most small businesses at some point or another will need more working capital than the company itself can supply. Fortunately, there are several resources available to small business owners that can provide the cash needed for daily and monthly operations.

1. Bank Loans

Working capital, or the money a company needs to run its normal operating cycle, can be obtained from small business loans. Borrowers can turn to commercial lenders, credit unions, local banks and even the government’s Small Business Administration for these types of loans. The repayment terms can be as short as one-year and as long as seven years. Working capital loans are generally secured by some of the company’s assets.

2. Lines of Credit

Another type of small business financing available from banks and other lenders is a line of credit. This allows business owners to take out funds on an as-needed basis, similar in some ways to a credit card. These often have shorter repayment terms and are best for short-term working capital needs. Lines of credit are also typically secured by the firm’s assets but are often slightly more expensive than standard bank loans.

3. Trade Credit

Businesses can also make trade credit agreements with their long-time suppliers. The suppliers agree to provide the service or goods with delayed payment terms. Trade credit terms are wholly determined between supplier and small business owner, but most credit extended is typically due no more than 90 days after service or supply date.

4. Factoring

Factoring companies will buy your accounts receivable at a discount and then collect the balances for themselves. This is a pricier way to finance working capital, but it can be a short-term solution for businesses truly strapped for cash.

With the help of one or more of these sources, small businesses can keep their daily operations running smoothly until their profits become self-sustaining.


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