Working Capital
Capital used to carry ordinary operating costs when money leaves the business before it comes back in.
- Typical purpose
- Operating costs and timing
- Request range
- $50,000 to $5 million
- Common in
- Construction, distribution, staffing, healthcare
Working capital financing covers the ordinary running costs of a business when the timing of revenue does not line up with the timing of expenses. Payroll runs every two weeks. Materials are bought before a job is billed. Insurance renews on a schedule that has nothing to do with when a customer pays. A profitable company can still run short in a given month, and that shortfall is an operating problem rather than a sign of weakness.
Most owners who ask about working capital are not trying to fix a broken business. They are trying to keep a healthy business from slowing down while it waits to be paid, or while it takes on more volume than its current cash position comfortably supports.
A typical situation
A distributor lands a larger recurring order and has to buy inventory sixty days before the first invoice is paid.
When this usually comes up
- Revenue is growing and the cash required to support that growth arrives later than the costs
- Customer payment terms have stretched while vendor terms have not
- A seasonal stretch pulls cash down before the busy period rebuilds it
- A large contract requires spending upfront on labor and materials
- Several smaller obligations are being juggled and the owner wants one clear plan for the next few months
Common uses
- Payroll during a stretch between billing and collection
- Materials, supplies, and inventory for work already awarded
- Insurance, licensing, bonding, and renewal costs
- Vendor payments where paying early protects pricing or supply
- Short term staffing for a specific increase in volume
What gets reviewed
Review varies by request. In general, the items below carry the most weight in this category, and having them ready shortens the conversation considerably.
- 01Recent business bank statements showing deposit patterns
- 02Time in business and ownership structure
- 03Industry and the way the business collects revenue
- 04Existing business financing obligations
- 05The stated purpose of the funds and how the business expects to repay
Before you commit
Match the length of the financing to the length of the need
Working capital is meant to solve a timing problem, not to fund a permanent hole. If the gap you are covering repeats every single month with no seasonal explanation, the underlying issue is usually pricing, collections, or cost structure, and financing on its own will not correct it.
Know your collection cycle before you decide the amount
The most useful number in a working capital conversation is how many days pass between doing the work and receiving payment. Once you know that, sizing the request becomes an arithmetic exercise instead of a guess.
Account for the obligations you already carry
Existing financing affects both what is available and what is sensible. Bringing an accurate picture of current balances and payment schedules to the conversation saves time and produces a more realistic result.
Often a fit when
Companies with steady revenue and a clear, explainable gap between when costs are paid and when customers pay.
Usually not the right tool when
Businesses looking to cover a long term structural loss, or newer companies without an operating history to review.
Questions about working capital
Match the length of the financing to the length of the need
Working capital is meant to solve a timing problem, not to fund a permanent hole. If the gap you are covering repeats every single month with no seasonal explanation, the underlying issue is usually pricing, collections, or cost structure, and financing on its own will not correct it.
Know your collection cycle before you decide the amount
The most useful number in a working capital conversation is how many days pass between doing the work and receiving payment. Once you know that, sizing the request becomes an arithmetic exercise instead of a guess.
Account for the obligations you already carry
Existing financing affects both what is available and what is sensible. Bringing an accurate picture of current balances and payment schedules to the conversation saves time and produces a more realistic result.
Talk it through before deciding
If you are weighing this against another structure, say so in the application. It is a better conversation when we know what you are comparing.