5 ways to access working capital.

Did you hear about that time KFC ran out of chicken? Or the florist who ran out of red roses on Valentine’s Day?

Despite the results, these retailers no doubt took steps to ensure they had adequate stock on hand. The thing is, even the best calculations can sometimes be off, the best laid plans can fall through and unexpected expenses will always crop up to wreak havoc on your working capital.

By definition, working capital is the amount by which current assets exceed liabilities - the cash available for the day-to-day expenses of running a business. It is often considered a measure of business efficiency and the short-term financial health of a business.

It’s a delicate juggling act but oftentimes, even good financial management is not enough and businesses need supplementary working capital. So where can they get it?

Here are the top five ways to access working capital for your business:

5 ways to manage working capital:

  1. Bank overdraft

A bank overdraft is a really easy way for a small business to access credit to manage working capital. One of the main benefits of this kind of loan is that you will only pay for the interest applicable to the amount of money overdrawn. The interest rates on a bank overdraft are generally about one to two per cent more than the standard interest rate.

  1. Short term small business loan

A short term business loan is a good option for seasonal businesses that need to manage working capital. These small business loans generally come with a fixed interest rate. Nowadays, alternative lending platforms like Spotcap, offer an unsecured line of credit, which means you no longer need to have property or assets to borrow against.

Spotcap offers small business loans between $1,000 and $250,000 which can be repaid over a six or 12 month repayment period. There are no early exit fees which is great for seasonal businesses that can easily access finance during quiet periods and pay it back when business picks up again.

  1. Equity funding

Equity funding generally means investment from friends or family or even home equity loans. This is a great option for businesses in the early growth stages. The benefit of an equity loan is that the business doesn’t need to have a solid financial history to secure this kind of credit.

  1. Factoring or advances

Factoring is a financial transaction where a company can sell invoices to a third party to meet its immediate working capital needs. The value of a factoring loan is based on future credit card receipts and is therefore only appropriate for businesses which accept credit cards.

  1. Trade Creditor

Often suppliers will offer a trade credit facility or a loan when you place bulk orders from that company. The supplier will generally conduct an extensive review of your company’s credit history before providing the loan so a good financial history is required.

With so many options available to help small businesses manage working capital, it doesn’t make sense for SMEs to turn to their own personal resources to meet their financial needs anymore. A working capital loan can help you handle any financial concerns that may arise leaving you to continue business as usual.



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