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Starting a small business requires funding. There are all sort of costs, the largest often being inventory. Businesses need working capital in order to get them through their operating cycles, but figuring out just how much is needed can be tricky.

Working capital is defined as the difference between business assets and business liabilities. It is also sometimes used to mean the amount of money a firm needs to keep things running until the operation becomes profitable. It is essentially how much money a company currently has on hand to run the business.

In order to determine how much capital is needed, take a look at your business’ operating cycle cash needs. If you are just starting a company, try to forecast how much money you can generate from your service or product in the next six months. If you have been doing business for a while or are buying a small business, looking at the past couple years of revenue should give you a good idea of what the next six months will hold.

Then determine how much cash it will take to operate your business during that time. Don’t forget to factor in costs like rent and employee salaries. For good measure, add a 10 to 15 percent cushion to this total to make sure you are covered in emergencies and you will have a pretty good idea of how much working capital your business needs.

When it comes to obtaining that capital, there are several sources available. A small business loan is one way to get all the short-term funding you need. Some lenders even provide loans specifically for seasonal or short-term working capital. If a loan is not the best fit, you could turn to friends and family for help. Peer-to-peer lending can also satisfy smaller financial needs.

With some careful planning you can make sure your business is well funded with all the working capital required.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources