Working Capital: What Is It and Why Does It Matter?
Working capital. We've all heard this term, but what does it really mean?
To put it simply, working capital is a company's liquid assets that fund its day-to-day operations. Business owners should use working capital as a metric to understand their company's financial health.
Below, we've outlined a simple way to calculate your working capital.
Just follow this 3-step process:
1. Calculate your current expenses, debts, liabilities.
This could include rent, power and water, accounts payable, payroll, payments to vendors, supplies/materials... the list goes on. You're the only one who fully understands your company's outstanding and regular expenses, so it's important to be thorough.
2. Calculate your assets.
This could include the cash in your checking and savings accounts, mutual funds, stocks, inventory, accounts receivable, paid-off assets and equipment, etc.
3. Subtract your liabilities from your assets to get your working capital.
Let's say you have $500,000 in assets and $450,000 in liabilities. That means your working capital is $50,000.
Okay, great. But what does this mean?
When completing these 3 steps, many small business owners find that they are at, near, or below $0 – meaning they have more liabilities than assets, which indicates a shortage of cash flow (or liquid).
Liquidity is important for all businesses – it can help you cover regular business needs, purchase assets, expand your market share, and have wiggle room for unexpected emergencies.
Elevate Funding is a direct funder that specializes in Merchant Cash Advances (MCAs). An MCA is not a loan – it’s simply a way to get access to your future sales [liquid] immediately. The MCA application process is simple and quick, and we are able to fund companies in as little as 24 hours. Plus, there are no restrictions on how you use the funds.
More perks? We do NOT check credit (for our standard MCA product), we do NOT charge outrageous fees, and we do NOT require collateral.
When you select Elevate as your funding provider, you are placing a safe bet on your financial future. We want to see our merchants succeed, and we will do everything in our power to work with you on your specific needs.
If you need funding and wish to speak to someone now, please call us at 888-382-3945 or click here to send us an inquiry. One of our teammates will get back to you as soon as they are available.