What is “Working Capital” and how can it help your business?

What is Working Capital?

If we look at the Oxford Dictionary, we can see the following definitions:

“Capital is another word for money and working capital is the money available to fund a company’s day to day operations”

What is the working capital cycle?

“The working capital cycle is the length of time it takes to convert net working capital (current assets – current liabilities) into cash”

There are a number of Working Capital Finance Options that businesses can avail of:

1. Purchase Order Finance
2. Trade Finance Options, LC’s, Bank Guarantees, etc.
3. Stocking Finance
4. Reverse Factoring
5. Invoice Discounting
6. Overdrafts, etc.

However, in the current banking climate, the Pillar Banks are less willing to lend to small and medium sized businesses due to a number of legacy issues that arose from the economic downturn – such as regulation, capital adequacy, and cost cutting. The pillar banks are also moving to direct models of banking, which is not working for SME’s and their businesses.

Yet despite this 92% of SMEs still rely on thE main banks as their source of funding. Honest brokers and state bodies such as Enterprise Ireland emphasise the vital need for businesses to diversify their funding and to look at other options than the pillar banks. This is where non-finance, such as invoice discounting options can be extremely beneficial to companies looking to increase their cashflow.

What are the advantages of Invoice Discounting?

Invoice Discounting can be used to:

1. Extend Creditor Terms
2. Improve Stock Control
3. Reduce Debtor Terms
4. Improved Credit Control Function
5. Reduce Overheads/Cost

If your business needs working capital, Capitalflow can help you identify the right finance solution to your business needs. You can get in touch with us 0n 01-5632400 or john.makey@capitalflow.ie