Six Words To Describe Working Capital

Because even the most successful businesses need an effective source for short-term

commercial funding, working capital financing has become an increasingly critical topic for small business owners during the recent commercial lending crisis. In addition to reducing credit card processing costs, working capital alternatives to be explored include working capital loans and business cash advances. We are providing a series of six-word descriptions about working capital management options in order to give business owners a concise explanation of the problems which need to be anticipated. Several separate reports which include "seven words describing commercial real estate financing" contain additional small business financing evaluations.

The first illustration of six words to describe working capital is "avoid a long and winding road". This refers to the importance of determining if business financing is actually available from the commercial lender in question. It has become an unfortunate reality for commercial finance applications to take several months only to find out that funding is declined in the current business lending climate. Business owners should be prepared to watch for similar signs because such unnecessary delays have become so common. It should be possible to determine within just a few days if commercial financing is feasible for a specific business need, and the entire funding process should be finalized in three weeks or less.

As a second observation, "banks are not an effective solution" for almost any working capital financing situation. Many banks in every region of the country are routinely reducing or eliminating business lines of credit. Even though commercial loan activity for banks continues to decline steadily, most bankers have continued to state that they are providing normal levels of business financing. Whether a small business needs a traditional working capital loan or a merchant cash advance based upon credit card processing activity, the commercial lender willing to provide the funding is increasingly unlikely to be a bank. Precisely because bank financing for small businesses has become so hard to obtain, it has become common to hear phrases such as "thinking outside the bank" and "business loans without banks".

The third description is "working capital management must be improved". Business owners will discover that working capital options now assume a higher priority because other forms of small business financing such as commercial real estate loans have also been reduced or eliminated by so many banks. If a commercial mortgage cannot be refinanced to provide needed funding, short-term financing will become a mandatory "plan B" in most cases. For example, a business cash advance program can result in unexpected improvements such as reducing credit card processing fees.

Because there are so many potential reasons for small business owners to be confused by recent business financing changes, the last example of six words describing working capital finance is "working capital experts will be necessary". The use of commercial finance experts would be a prudent step even without the current commercial banking problems. When commercial borrowers are also asked to deal with evaluating both new business funding sources and new working capital options, finding a business financing expert to help should be a practical solution.

This analysis is one of several overviews about business banking problems and commercial loans. This report was designed to produce a concise explanation of current cash management issues with a simplified approach by describing working capital management difficulties in six words. As suggested in the analysis above, the entire process should be more effective for small business owners when major business financing obstacles are both understood and anticipated even when there are substantial difficulties to be expected with most current efforts to obtain working capital.

by: Stephen Bush

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