What are the Right Working Capital Solutions for Your Business?
If your business needs working capital, there are many solutions that you can use. Not every working capital solution is good for your company. Knowing what your options are can help you decide the best course for your business and its needs.
Short-term Working Capital Solutions
If you need a short-term working capital solution, here are some good options for your company:
- • Bank overdraft. A bank overdraft as a source of working capital allows you to spend more than what is in your account. It should be noted that the amount is limited and is a type of loan that must be repaid.
- Income received in advance. This type of working capital is considered a liability because it does not correlate to the current accounting year. The income account is credited to the income received in advance, which is then debited to the income account.
- Commercial papers. This type of working capital is an unsecured promissory note. Only firms with excellent credit ratings are able to sell their commercial papers at a good price because it is unsecured.
Long-term Working Capital Solutions
If you need a long-term working capital solution, here are some good options for your company:
- Loans. A loan is one of the most widely used forms of long-term capital for businesses. There are many options available, making it likely you can find a solution for your capital needs.
- Equity capital. This type of working capital solution trades stock to a shareholder for cash or an equivalent item of value.
Knowing what your needs are for working capital can help you narrow your options to a solution that is best for your business. From selecting a short- or long-term solution to the specific type of working capital option, you can use these solutions to ensure your organization has the working capital it needs to achieve your business goals.