Working capital for a business is the amount of money needed to keep the daily operations of the business running. Using assets as collateral and having a strong business plan are some tips that can be used when applying for a fast working capital loan.
Working capital is the resource that many entrepreneurs turn to daily to pay suppliers, salaries, and bills while cash is not coming in. With or without a financial crisis, it is essential to keep a company’s doors open. The fast working capital loan for a company ends up being, then, the way out for many business owners during the dark days.
What is working capital?
In personal finance, there is an X amount needed to keep up with the month’s bills. Those who take good care of their money know that this amount should always be set aside for unforeseen events, such as late payment. Whatever is used up needs to be replaced as soon as possible?
In company finances, this is the role of working capital. It is the amount that the business requires to keep running and is usually concentrated in cash or highly liquid assets (quickly converted into cash).
Working capital needs to cover salaries, supplier payments, rent, taxes, electricity, and water bills… in short, day-to-day operating expenses without which the company cannot produce or deliver services.
How much should I save for working capital for the company?
There is no exact amount to be saved for working capital because the operational expenses vary according to each business. However, experts recommend that entrepreneurs have as working capital the equivalent of at least six times the total monthly expenses.
For example, if your company’s monthly expenses are R$20,000, the ideal would be to have R$120,000 in working capital loan.
Note that to determine this value, it is essential to make and study the company’s financial planning. The entrepreneur must know exactly what it will cost to keep the business running for a month.
How do I overcome debts and lack of working capital?
An entrepreneur knows that most businesses take time to get a good cash flow or start generating profit. These expected difficulties when added to the unpredictability of an economic crisis, besides burning up the working capital of the most cautious entrepreneur, can lead to debt.
Without the forecast of cash inflows, thinking about building a working capital reserve seems impossible. At such times, many companies need to rely on external help from investors, loans, government programs, and even personal economic reserves to overcome debts and the lack of working capital loan
How to get working capital for the company?
In an ideal scenario, a company’s working capital needs are met over the months by earmarking part of the income to build this amount. However, this is not the reality for most companies, especially the working capital loan for new companies and MEI. Here are some ways to get this value:
- P2P: Peer-to-peer (P2P) lending is a form of collective lending that brings together on digital platforms entrepreneurs who need credit and companies that want to give credit. All this without the mediation of traditional banks, which usually avoids bureaucracy and speeds up the process;
- Anticipation of receivables: advance payments already scheduled to be received in the future. It is an anticipation of the amount of cash flow that usually comes from term purchases;
- External investors: contribution coming from people interested in investing in the company. The amount can come from investment programs, potential partners, angel investors, etc. The disadvantage is that this option requires time and patience to find the investment;
- Lines of credit for working capital for companies: Almost all banks, and companies like the ‘U.S. Fund Source’, provides a line of credit for working capital for companies. This is the most traditional way to get the amount. The tip is to run simulations and research the best interest rates before looking for a bank;
- Working capital for companies in the pandemic: The government has approved some measures to lessen the impact of the pandemic on company finances. Among the programs are credit lines and incentives for risk reduction such as PRONAMPE and PEAC – measures that cater especially to micro and small entrepreneurs.
- Asset-backed loans: loans for CNPJ and CPF that use assets (real estate, vehicles, jewelry, etc.) as collateral are also an option to get working capital for companies. The advantage does not depend on specific credit lines, besides being one of the modalities with the lowest interest rates for CNPJ.
How to obtain and increase your working capital
If having your working capital loan is not yet a reality in your company, check these guidelines to achieve this goal and find balance and health for your business’ finances.
- A fine-toothed comb on costs: identify and cut expenses
It’s a good idea to have a company that has a lot of money to spend, but that’s not always the case. Always keep an eye on your cash flow to keep your finances on track, because companies often close their doors due to poor working capital management.
- Focus and discipline
Do not use your working capital to cover some expenses and fail to replace the same amount when cash comes in, this can be the beginning of the end. Be careful with your financial control, reducing possible risks in the future.
- Negotiate with suppliers and clients
Look for the most comfortable forms of payment with your suppliers, with an increase in the term or, if the cash price is cheaper, check if this discount fits into your working capital planning.
For customers, try whenever possible to reduce financing terms. It is difficult, since competitors may offer better payment terms than yours. However, it doesn’t hurt to try.
- Consider taking out a low-interest loan
Even with planning and care with finances, some companies do not have good working capital. Therefore, you need to develop strategies to expand or get it through a third party.