What is Working Capital Finance and How can I Use it?

Company finance

As well as ensuring the delivery of high quality goods and services, you also need to keep a close eye on your business’ finances. Every day that your business operates you’re certain to incur any number of expenses which all affect your working capital. However, if these costs regularly exceed your business’ income, it could indicate impending financial difficulty. But there is a solution. By applying for Working Capital Finance, your business could benefit from a wide range of finance solutions that could help you quickly turn the situation around.

Why should I apply for Working Capital Finance?

Working capital measures your business’ current assets (income, account receivables, inventory, etc.) against your current liabilities (business tax, supply costs, repairs, utility bills, staff wages, insurance premiums, etc). Naturally, you want to be aiming for positive working capital. But if your working capital has turned negative, then you need to act fast to prevent the situation from getting any worse. This is why applying for Working Capital Finance as soon as you’re aware of any issue is so important.

Working Capital Finance describes a wide range of finance solutions that can be used for a variety of purposes to help reinforce your monthly income or support income-generating projects. Plus, some of the products that are available could be agreed in as little as 48 hours, depending the complexity of the request. But in order to make an informed decision, you must ensure that you have a comprehensive understanding of the products that are on offer.

What Working Capital Finance solutions could I apply for?

  • Invoice Finance: is a secured form of lending that enables you to release up to 90% of the capital tied up in any business-to-business (B2B) invoice worth in excess of £5,000. There are two types of Invoice Finance: Factoring and Discounting. Either you remain the debt collector or transfer this responsibility to the lender, depending on the type of Invoice Finance you choose. Any funds that you do receive can be used for a range of purposes, including replenishing inventory, cashflow shortfalls, refurbishments and other essential growth projects.


  • Overdraft Replacement: on the other hand, this form of funding acts very much like a credit card for your business. It works by offering you a line of credit that gives your business access to an allowance. The credit limit on this allowance is based on your past income. Although you aren’t required to make use of any of the funds that are available, anything that you do withdraw will need to be repaid within 30 – 90 days (depending on the agreement), plus interest. Should you take more than what was agreed, you’ll also be charged an overdraft penalty. As soon as you’ve fully repaid whatever you’ve withdrawn, you’ll be able to instantly draw from the allowance again on a revolving cycle, resulting in it acting as a buffer for your finances. Because Overdraft Replacement doesn’t carry any usage restrictions, it can be used to support uneven cashflow, cover staff wages, supplies, emergencies, tax demands and any other essential business projects.


  • Merchant Cash Advance: If your business is able to support credit and debit card payments, you could apply for a Merchant Cash Advance and receive an advance based on your predicted future monthly card-based sales. This is achieved by the lender reviewing your card-based sales reports for 3 or more consecutive months and using them to calculate an average. So, if your business usually generates around £30,000 in card-based sales in any month, the advance could be in the same region. To repay a Merchant Cash Advance, the lender will deduct an agreed percentage from each of your card-based sales until the agreement is fully repaid. A Merchant Cash Advance allows you to support emergencies, tax demands, uneven cashflow, staff wages, supplies and ongoing growth projects.


  • Asset Refinance: enables you to raise capital for your business by releasing up to 100% of the equity held within one or more your business’ unencumbered assets. This form of funding can last for a term of upto 5 years, during which you’ll be required to make fixed monthly repayments, plus interest. By choosing to apply for an Asset Refinance agreement you can support equipment purchases, cashflow shortfalls, staff wages, emergencies, tax demands and other essential growth projects.

Looking to support your business’ working capital?

As a business owner, ensuring that your day-to-day operations are carried out successfully is crucial. However, if you were to unexpectedly experience a drop in monthly income, supporting operations can prove challenging and may force you into a precarious financial situation. Yet by applying for Working Capital Finance, managing your financial situation needn’t be a problem. All you need to do source an agreement suitable for your business’ needs.

About Carson Derrow

My name is Carson Derrow I'm an entrepreneur, professional blogger, and marketer from Arkansas. I've been writing for startups and small businesses since 2012. I share the latest business news, tools, resources, and marketing tips to help startups and small businesses to grow their business.

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