Why Businesses Need Positive Working Capital

Why Businesses Need Positive Working Capital

Every business needs positive working capital. That’s especially true when it’s possible that a recession could be on the horizon—but it’s also true even when times are booming. Working capital opens doors. It creates potential and possibilities. Here are some of the core reasons why businesses need to have working capital on hand.

You Can Take Advantage of Opportunities

Let’s say you suddenly got the chance to purchase a large amount of inventory at half off. But you didn’t have the cash to do so. That would be a tremendous opportunity for greater profit that you can’t take advantage of because there just isn’t the cash at hand. Having cash at hand means that you’ll be able to leap at opportunities when they’re available, and that’s invaluable.

You Can Spend Money to Make Money

When you have money, you can spend more money on things like advertising. You can boost your profitability by experimenting with new products and services, hiring employees and consultants, and generally figuring out your market faster. Money is the grease that keeps companies going, and it keeps your organization moving and agile. Working capital is essential to a healthy business.

You Will Be Able to Get Credit If You Need It

It seems funny, but you need to have money to get money. That’s the truth in business. The more money you have at hand, the better your business credit will be, and the more opportunities you’ll have for loans. If you have $0 in the bank, a $20,000 loan isn’t likely. If you have $20,000 in the bank, you can get a $20,000 loan, and now you have $40,000 to spend.

When you have money, you can spend more money on things like advertising. You can boost your profitability by experimenting with new products and services, hiring employees and consultants, and generally figuring out your market faster.

You Can Deal With the Unexpected

Issues can always occur. Perhaps you experience supply chain issues and suddenly don’t have merchandise to sell. Maybe you have a technical issue, and your business is disrupted for a week or more. Maybe it’s just a slow period.

Having a cash buffer means that you can adapt to these issues. You don’t need to worry. The funds are available. Meanwhile, businesses that don’t have a buffer are very likely to fail entirely during these situations. The number one killer of business is a lack of liquidity. Working capital provides that liquidity.

Getting Working Capital

More money is better. That goes without saying. But some businesses have already been turned down from traditional lenders and don’t think it’s possible to get more funds. Those businesses need My Company Funding.

If your business doesn’t have a buffer of at least a few months, you need to have it. Otherwise, there are opportunities that could pass you by, and challenges that could become even harder. Contact My Company Funding today to connect with people who can help you.