Improving Your Working Capital Through Financing

In today’s economy, your business needs nurturing and attention with sufficient cash flow to continue grow. In addition, you need consistent working capital to pay your ongoing expenses.


Working capital, which is current assets minus current liabilities, needs to be positive or your business can be in serious trouble. A negative working capital is an experience that unfortunately many small businesses share, no matter what sector.  After all, there can be delays in customer payments, slow seasons, an unexpected downturn in the economy or many other events that leave you with a dearth of cash to pay your immediate bills.  Even if you will be swimming in cash in a few months, it doesn’t help you at the moment. In fact, lack of working capital is the most frequent reason cited for small business failures.

While you can try to improve your working capital by adjusting your business plans, renegotiating terms with creditors or trying to get customers to pay in a timelier manner, it may not be enough. You may need to consider getting financing. Fortunately, there are a lot of options, but you need to look into the choices in depth to determine the best solution for your situation.

Be Prepared

Before deciding on any financing, you need to know exactly how much your business will require and how much you can afford to pay. You should determine the shortfall amount between paying your monthly bills and your available cash. It’s also important to be realistic about your growth potential and if you will have enough extra money down the line to pay your monthly bills and a loan payment.

Do your Research

There are a multitude of options to get financing. Among the most common are banks and alternative financial companies.

To be blunt, major banks, which generally charge lower interest rates, are reluctant to make short-term loans, particularly for smaller amounts. It’s more profitable for them to have larger loans over an extended period. That’s one of the main reasons behind banks’ acceptance rate of lower than 20% for small business loans. Additionally, the requirements are quite stringent, including higher credit scores and documentation for at least three years as well as collateral usually in the form of real estate. Banks can be quite particular regarding the industries they lend to as many are deemed too risky, such as restaurants, auto repair and beauty services. The loan process can also be quite lengthy.

Alternative finance companies have blossomed in recent years because of the difficulties in getting bank loans. These lenders have more flexible requirements regarding credit scores and are keen on working with small businesses in almost all industry types for short-term loans and other types of financing, such as business loans and advances. The downside to alternative lenders is that interest rates tend to be higher than banks so you need to consider that when figuring out your loan amount.

With a business loan from a bank or alternative lender, you’ll receive a lump sum that is repaid on agreed upon terms between the two parties.  As noted, these are targeted for more expensive items, such as major equipment and large inventory purchases or refinancing existing debt. Essentially, you would get a loan to help grow your business on a longer-term basis.

Alternative lenders such as BFS Capital are more flexible in terms of credit score requirements, documentation and other criteria. The decision-making process is much faster than banks as well. You should note that these alternative lenders can cost more than most major banks depending on the risk of the loan. However, if you need to make a significant purchase to help grow your business and are not able to qualify for a bank loan, an alternative lender can be a very attractive option.

Additionally, alternative lenders may provide another way for short-term funding needs because of their willingness to make loans for smaller amounts.

This article is sponsored by BFS Capital, which has been in business for 15 years, has an A+ rating from the Better Business Bureau (BBB). The application process for BFS Capital is quite fast and easy compared with banks in terms of paperwork and documentation. Once approved, a business owner can receive the funds in a few days.

BFS Capital allows business owners the flexibility to use the loan money in the best way possible for their business, unlike banks which require extensive documentation on exactly how the funds will be used. BFS Capital has both an online application process and funding advisors to assist you throughout the process and answer any questions you may have.

These products can be either business loans or merchant cash advances. Business loans may be provided by third parties and are subject to lender approval. Products offered by BFS Capital and affiliates are not consumer loans. In California, loans made or arranged pursuant to a California Finance Lenders Law license by BFS West Inc. or made by other lenders. Time to funding subject to processing time by merchant’s bank.