Working capital is what fuels every business. And the mantra behind having sufficient funds is to strike the right balance between your assets and your liabilities. The challenge that most organizations face is in keeping the scale tipped towards their assets and maintaining a healthy credit rating. So read on to find out about the best ways to raise your working capital.
Managing Trade Credit
It’s important to maintain a good rapport with your trade creditors. They provide trade credit in the form of business supplies and equipment that can be paid for at a later date. Such an arrangement can give you time to raise more funds and eventually repay these creditors. Do keep in mind that trade creditors gauge your business volumes, previous payment records, and current liquidity status before they grant you trade credit.
A bank overdraft is a speedy way of raising short-term funds as it helps with withdrawals over current account balances. The overdraft limit, however, depends on your credit history, business turnover, collateral assets, and the reason for the overdraft.
Working Capital Loans
There are two types of working capital loans you can choose from to suit your needs — secured and unsecured loans. These loans are known to boost a businesses’ money reserves, either in the short or medium term.
Out of all the forms of invoice financing, invoice discounting is the simplest and the most accessible, in which, invoices and account receivables can be used as collateral assets. This short-term mode of raising funds and rotating money can help you cater to more business volume.
Merchant Cash Advance
If your business accepts payment through cards, then you might want to use the option of a merchant cash advance to raise your working capital. Lenders grant an advance lump sum that is usually repaid through regular card receipts on your POS machine. So, if your business doesn’t have large assets but has regular card transactions every month, merchant cash advance is meant for you.
Revolving Credit Line
This is an arrangement you can make with your lender, creating an always available line of credit ( upto a certain limit), that can be repaid at your convenience — as a lump sum or in installments.
From a working capital loan to a revolving credit line, the options of raising your working capital are numerous. All you have to do is assess what suits your business best and make an informed choice. Thankfully, today, all these options are highly accessible and reliable.