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Whether you want to expand your existing business or begin a brand-new venture, you would need working capital financing for sure. Working Capital has been the go-to indicator to measure a company’s financial health and well-being since time immemorial.
Working capital for business = Current assets – Current liabilities
Here, current assets include liquid assets like cash and accounts receivables. And current liabilities include debts and obligations due in a year.
Conventionally, financially sound companies demonstrate current assets greater than current liabilities. Adequate working capital helps companies balance liquidity and profitability while aiming for continuous and consistent growth.
There are multiple ways to unlock working capital, including inventory management, optimizing supplier payments, accelerating customer collections, and working capital financing. Effectively managing working capital is crucial for businesses to run day-to-day operations smoothly, survive, and scale in the long run.
Business comes with its share of highs and lows for both start-ups and established enterprises. However, for businesses to thrive in either environment optimising working capital is a must. Maintaining a steady stream of liquidity ensures enterprises are sustainable and meet basic needs such as hold necessary inventory, pay salaries, rent, utilities, and mortgage payments on time. It also allows for surplus cash to be reinvested in scaling up the business.
Working capital financing facilitates entrepreneurs with perpetual access to capital and helps optimize cash flows while investing in the company’s growth.
Several businesses are cyclical wherein the business doubles or triples in certain months like festive periods or summers. While businesses are keen on capitalising these seasonal upswings, they are always worried about the severe working capital crunch, holding them back from taking up larger orders.
Working capital financing can help bridge this gap and equip businesses to leverage the increase in demand without adding stress to financials. Tata Capital offers peak limit activation for its working capital borrowers to accommodate seasonal fluctuations in the business without any additional documentation.
Financiers and prospective customers look at robust working capital balance as one of the critical indicators of financial health or creditworthiness in any company. Maintaining good creditworthiness can also open up access to higher amounts of business financing and better interest rates. If used prudently, working capital financing can reflect how well an organization manages its operations.
Every business comes with its risk, and no better time than the pandemic to reinstate how uncertain and susceptible companies are to economic fluctuations. Working capital financing can help navigate an unprecedented crisis by providing enough cushion to manage essential expenditures to keep the business afloat. If you are currently facing a financial crunch with the pandemic, don’t hesitate to reach out to Tata Capital for additional support.
One of the biggest challenges small businesses face is the lack of access to working capital at competitive rates to facilitate their growth. Access to working capital enables scaling up the business to its true potential while providing room for a margin of error. Companies with additional working capital have the freedom to take on larger orders from their customers without impacting their current fulfilling capabilities. It also ensures accurate financial forecasting that helps entrepreneurs make well-informed choices and accelerate growth.
Maintaining a healthy reserve of working capital will help you run day-to-day operations smoothly. Additionally, access to sufficient working capital also provides avenues to grow and scale business to its fullest potential. Have more questions on how working capital can work for your business? Visit our website to know more.
Policies, Codes & Other Documents