Working capital is the capital or liquid assets used for daily and monthly business operations, such as rent, payroll and debt payments. It is calculated as current assets minus current liabilities. Working capital essentially gives the company flexibility to invest in its growth and cover day-today expenses.

Let’s look at the uses of working capital for your business.

1-Purchase inventory

Inventory may be necessary to launch a new product line or business services. You could also need inventory fulfil an existing huge project. Working capital can help businesses buy adequate inventory. Occasionally, sales may be slow and profits could be low. Purchasing inventory can become difficult at such times. Working capital loans can be a reliable source of funding during such times.

2-Better negotiations with vendors

Businesses rely on good relationships with vendors so that their operations run smoothly. To maintain a good relationship and negotiate better terms, it is important to promptly pay them. However, paying the vendors on time can be a huge worry if you are short of cash. Working capital can ensure on-time payments to vendors.

3-Overcome operational hurdles

There may be expenses that you have not considered while budgeting. Alternately, some clients could default or delay their payments. It is also possible that your business may not be able to achieve sales profits yet. A working capital loan could help you bridge gaps in the cash flow during such challenging times.

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Every business needs marketing to draw customers and build a brand. Through marketing, the business can get increased attention, traffic, and profits. However, investing in marketing is a costly proposition. Working capital loans can provide businesses with funds for traditional & online, events/ tradeshows, media initiatives etc.

5-Exporting products and services

Recently, businesses have started targeting international markets. SMEs and start-ups must study the markets in different countries. This means that it is necessary to invest in market research as well. Furthermore, when exporting, there are other financial expenses too. These include operational and export costs, among others. Working capital helps businesses fund the various costs that arise during exports.

6-Recruiting talent

Recruiting talent is an important and expensive part of running a successful business. SMEs and start-ups need adequate funds to hire the best available talent. Working capital provides the funds to invest in employees, whether permanent or temporary. It also provides the funds to invest in employee training and development.

The bottom-line

Working capital can help your business reach its potential in a quicker and more efficient way. A working capital loan can help you buy time to generate revenue based on current capital and resources.

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Author's Bio: 

Anuj Pandey is an experienced financial advisor and writer, who is well known for his ability to market trends as well as for his financial knowledge. He has worked extensively in the finance sector and also written numerous blogs on finance and startup etc. and how they affect the customer in the present market scenario. He has done MBA in finance. Anuj has also amassed a great name for himself as a financial blogger.