Ask a Small Business Financing Expert: When Do Companies Need Working Capital Finance?

In another installment of Ask a Small Business Financing Expert, Dan McCallum, Gibraltar Business Capital vice president, answers two important questions: When do companies need working capital finance most? What is working capital finance best used for?

Working capital is a common measure of liquidity, or the amount of cash on hand to handle the day-to-day operations of running a business. Companies can find themselves short of working capital for any number of reasons, but when it happens, the need for working capital finance can be immediate.

“There are an infinite number of reasons and times that companies may need working capital finance,” says McCallum. Because cash inflows don’t align 100% with outflows, many businesses may need to invest upfront to initiate product or services creation—before that money turns into sales dollars. “Additionally, customers may be slow to pay their bills or a company’s vendors may need payments sooner than their customers pay them,” adds McCallum.

Various stages of a business lifecycle might change the flow of working capital: A startup company might need working capital to meet its day-to-day obligations or for established businesses, a change in a company’s financial health might require it to adjust. Businesses that are changing hands or restructuring might need working capital finance to navigate the transformation.

Seasonal or cyclical dips might require working capital finance to stay afloat during the off season to cover payroll, rent, maintenance or other obligations. Sometimes working capital finance is needed to fund inventory for a new product or to ramp up production for a new customer.

“Even healthy, established companies have ebbs and flows in working capital,” McCallum notes. Gibraltar helps businesses through those times by providing financing solutions like invoice- or asset-based financing that are tailor-made for each company’s circumstances.

“Gibraltar can help when traditional banks cannot,” says McCallum. “We can offer flexible terms and a creative loan structure that will help companies balance their working capital needs.”

Have questions about working capital? Follow the blog for Ask a Small Business Financing Expert updates or follow Gibraltar on Twitter via @GibraltarBC or using #WorkingCapitalExpert. Click here to submit a question to the team.

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