working capital loan

 working capital loan

what is working capital financing if you've ever heard the phrase cash flow is king it's talking about the working capital requirements of a small business..it's not uncommon for businesses large..and small to fund working capital needs..by borrowing but before you borrow you..should make sure you really understand what your working capital needs are to make sure you get the right financing for your business.

first let's take a look at working capital from the accounting perspective the definition of working capital is current assets minus..current liabilities it's not enough to simply have cash in the bank at the end of the what are your current assets they're made up of cash in the bank your..current accounts receivable and your inventory your current liabilities are defined as your current accounts payable and any long term payables your business

may have you'll want to think small..business loans lines of credit etc are..in this category as well if you divide..the value of your current liabilities..into your current assets you'll come up..with a ratio of assets to liabilities..the goal should be to shoot for twice as..many assets as you have liabilities or a..two to one ratio getting to a two to one..ratio is challenging for many businesses..but anything below a one to one ratio is..this giant red flag that you have..negative working capital even.

if you have cash in the bank at the end of the month so what does this mean for a small business for small businesses that might make more sense to consider the formula in terms of the average number of days it takes your inventory to turn over how quickly you need to pay for that inventory and the average number of days it takes for your customers claims you