Working Capital: Take your business to the next level

Working capital to a company is like blood to a human body. Just as stoppage or insufficient blood flow can lead to death, so can inadequate working capital lead to the demise of any business. According to a U.S. bank study, 82% of businesses that fail, do so not because of lack of profit, customers or growth, but because there is not enough money in the bank to cover day to day operations. Working capital is essentially the amount of money needed to carry on a business.

Following are some of the reasons to consider a working capital loan:

1) Your sales figures are looking up and you want to boost inventory or take advantage of supplier's discounts to grow your business.

Example, Supplier X as part of its purchases promotion campaign has offered to sell products at a 15% discount off their listed price. You, as a business owner, want to take advantage of these huge savings by buying your inventory in bulk to improve your bottom line but don’t have the cash to do it. 

2) Business is growing rapidly but you don't have cash on hand to fulfill a customer order or contract. Growth costs cash. The faster a business grows the more financing it needs. 

Example: Your manufacturing company ABC, with annual revenues of $1 million, lands a contract of $2 million. You estimate that manufacturing supplies will cost $1 million and labor will cost $400K for a total of $1.4 million. It will take 90 days to manufacture and deliver the product and another 30 days to collect on the receivables. This contract can raise your business to the next level but you don’t have enough cash to finance $1.4 million over 120 days.

3) Growth has stagnated due to insufficient working capital to undertake profitable projects.

4) Profitability is deteriorating and operating plans are becoming difficult to implement because of lack of working capital

5) You need extra capital that complements your existing line of credit when there maybe insufficient margining or collateral to support full working capital needs or require funds to support the changing production and sales activities of the business.

6) You need capital to carry out projects such as R&D, product and market development, or to invest in intangible assets such as intellectual property and goodwill

Need more information on working capital loans or business financing in general? Contact me at canadianbizloans@gmail.com or 403-608-4896