Why Is It Important to Have Sufficient Working Capital?

by Irish Taylor | Apr. 04, 2013

Copyright (c) 2013 Irish Taylor

Here are two reasons that will stress the importance of having sufficient working capital for business owners, no matter how small or big their enterprises might be:

1. Without sufficient funds, you cannot launch your enterprise. That's because the path towards establishing your own shop or store is paved with costs, usually in various forms. For instance, before you can launch your business, you need to spend cash to secure and process the necessary permits and licenses from the federal, state or local government. You also need ample funds to purchase product inventory, lease out a suitable commercial space, buy necessary office and manufacturing equipment, and, of course, hire manpower.

And the expenses don't end there! You also need to allot cash for utility bills, for transportation or travel allowances, for business insurance premiums and even for a suitable security system for your shop and store. Yes, without sufficient working capital, for sure your business venture will fail.

Hence, as early as today, you should look for suitable financing deals that can give you and your enterprise ample funds to cover all the costs involved in building as well as in launching your commercial establishment.

2. Cash is required to ensure business longevity. Funds are not only required for covering your start-up costs. You also need ample cash to ensure that your enterprise will thrive despite economic uncertainties and stiff competition in the market. But for what purposes?

Aside from supporting the day-to-day operations of your enterprise, you must have enough cash-on-hand to develop and introduce an appropriate marketing or advertising scheme. After all, such program will help expand your market and spike up sales.

Funds are also needed for business expansion projects. You should have enough money to renovate your current shop, expand your commercial operations, and even to build and finance your future store branches.

This means that regardless of the current state of your enterprise, you MUST have sufficient working capital to finance your urgent business needs as well as to support the long-term goals of your venture. Good thing that there are credit programs you can sign up for to supplement your working capital, which normally include the following:

- Bank loans. You may approach banks and credit agencies, nearby, and apply for traditional banks loans. You can opt to get either a secured or an unsecured loan from these traditional lending firms, depending on the need and budget of your small shop or store, and on your preferences, as the business owner.

What's good about these credit programs is they usually come with competitive interest rates, suitable payment terms, and huge loanable amounts.

However, you should remember that for your enterprise to receive the financing deal it needs; it is your responsibility as the entrepreneur to fill out all the necessary forms, prepare and submit the required documents and pay the processing or application charges.

- SBA loans. The Small Business Administration, or SBA, occasionally extends loans to small and medium-scale enterprises. The credit programs offered by this federal agency normally carry very affordable rates of interest and fees, flexible payment terms and options, and easy-to-prepare application requirements.

Still, such offers come once in a blue moon. No wonder, most business owners today resort to the business loans extended by banks, credit unions, and online lenders.

- Business credit cards. You can also get credit card accounts to cover the costs and bills incurred by your enterprise. These card programs work just like traditional credit cards. But they also come with features that will most certainly work to the advantage of your small shop or store.

For instance, you can look forward to receiving exciting perks and incentives, especially if your business credit card comes with rewards. You can also receive quarterly statements and reports regarding your credit card transactions, which can eventually serve as excellent references for your business accounting tasks and can help simplify your income tax filing activities, especially when tax season comes.

About Irish Taylor

Irish Taylor is a business loan consultant with http://www.startupbusinessloans.com/ and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.


About Chia-Li Chien

Chia-Li Chien

Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward and a faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Contact her at jolly@chialichien.com or (704) 268-9378 .

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