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In a Risky Economy, Small Business Owners Struggle to Meet Working Capital Needs – Here’s What They Can Do

Tuesday, April 18, 2017 0:03
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Mismanaged working capital is probably the biggest reason most small and medium size businesses shut down. The complexities of creating and sustaining a business are compounded by the fact that cash flows are volatile. You might have made promises to suppliers you can’t keep and could be waiting longer than expected for your clients to pay you. This sort of situation has the potential to quickly spiral out of control and unravel years of hard work building the business.

A sudden spike in short-term liabilities over immediately available assets could bring your business to a screeching halt. This fate is avoidable with a carefully planned working capital loan. Here’s what you need to know about these nifty financial instruments that could save your business.

What is it for?

Working capital loans are specifically designed to help businesses meet short-term needs. Unlike traditional loans, these loans are meant to satisfy the small daily expenses that are a part of running a business.

Business owners generally use the loans to even out the business cycle and keep their venture afloat. Retailers, for example, can dip into a working capital loan to pay employees or buy inventory during slow seasons. Depending on your credit, you can also use the money to meet unexpected losses and keep the business operational as it adjusts to economic headwinds.

If your customers have suddenly stopped paying for goods because they’re located in a country experiencing an economic crisis, or if your business has suddenly made a huge loss and is now struggling to pay employees, a working capital loan may be the best solution.

What are the advantages?

Working capital loans offer a long list of advantages that make them attractive for businesses. These loans don’t require collateral, let you manage the business with flexibility, offer you better peace of mind, and let you retain ownership of the firm and its assets despite sudden shocks.

How do you get one?

Just about any quick source of short-term funding could qualify as a working capital loan. You need cash or cash equivalents, and you need them on short notice. Bank overdrafts, invoice discounting, factoring, instalment credit, letters of credit, and commercial papers are all traditional sources of working capital.

In business, it pays to be prepared for the worst. You might not expect a sudden cash crunch, but it’s best to have a plan ready for when disaster strikes. Reach out to a financial expert, do your own research, and make arrangements for any eventuality.

Gaining access to a quick source of cash is likely to make your business a lot more stable and secure. This facility helps you manage operations with confidence and flexibility.  

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