![]() ![]() To answer this question, you need to understand how money flows through your business. How much working capital is needed to grow your small business? ![]() Money used to fund short-term assets like your business’s inventory and accounts receivables is correctly considered working capital financing. ![]() If your business is projecting losses in your first year, then you most likely need equity, and not working capital. If your business is unable to support the expenses for advertising and salaries, then most likely it is under-capitalized. For example, if your business is looking to get funding for an advertising budget and salaries for new employees, what you need is “long-term capital” or equity. The term “working capital” is often used incorrectly when talking about the financing needs of a business, especially for startups. Current liabilities are obligations that come due within one year, which are primarily your accounts payable and short-term debt This includes your accounts receivable and inventory. Current assets are short-term and can be converted quickly to cash. From an accounting standpoint, working capital = current assets – current liabilities. Let’s first be clear on what the term working capital means. Are you a small business owner looking to grow your business? Are you trying to figure out how much money you’ll need to put a growth plan into action? One of the key questions you should ask yourself is, “how much additional working capital do I need to grow my business?” This article will help answer that question. ![]()
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