The Significance of Working Capital for Your Company

 

A person signing a contract for financing.

When starting a business, one of the most important things you need to stay wary of is working capital. It can be likened to the lifeblood of a business that keeps the business operations running smoothly. A lot of businesses fail because they don't know how to manage them. Learn about its significance in this post and how asset-based financing can provide a viable solution for your business in places like Seattle and Washington.

Why is Working Capital Important?

Working capital is a business term used to describe the cash that a company has available to cover its daily operations. Through working capital, companies can take care of their internal payment obligations to employees as well as external obligations such as paying vendors as well as taxes and interest payments to the government and banks, respectively.

It is calculated by taking out the difference between current assets that the business owns, such as cash and accounts receivable, raw material inventory, and current liabilities like debts and accounts payable. The ideal working capital ratio is between the range of 1.5 and 2. Business look at this metric to get an indication of the state of their cash flows and if they can cover unexpected costs and invest in growth.

Factors that Cause Fluctuation in Working Capital

The value of working capital can fluctuate due to a variety of reasons, foremost of which is the rate of business growth. High-growing businesses need more inventory on hand. If cash runs out, this could create major problems in the supply chain, which could include not being able to fulfill orders. Other factors that influence it are the duration of the operating cycle and the state of the economy.Good working capital management helps companies manage their cash flow and stay afloat, especially in tough economic conditions. 

A person signing a contract for financing.

Asset Based Lending in Seattle, WA

If your business is growing fast and you need to fund your growth, then we highly recommend working with Global Capital Partners Fund LLC. 

They are reputable providers of asset-based lending and bridge financing across America, including places like Norfolk in Virginia, Tacoma, Seattle, and Spokane in Washington, Knoxville, Nashville,and Memphis in Tennessee, Annapolis, Baltimore, and Frederick, in Maryland, and Arlington in Texas.

The company enables fast injection of cash to your firm with their reliable hard money loans. Click here to learn more about their services.  

Reach out to them to learn more today! Read about their recent deals here.

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