Sources of Short-Term Business Working Capital Funding
You can manage this shortfall using borrowed funds, profits your company has accumulated over time, or using both. These are some of the sources of financing which you can use to manage gaps in your business’s working capital cycle.
A working capital line of credit refers to money you can take from a financial institution to fund your operating costs. You can borrow from a bank for a short-term against a credit line given by the institution. You can pay off the same after collecting sales proceeds from your debtors.
Good relationships with creditors can often be used for making credit period stretch longer in the case of a big order and can enable funding at a lower expense.
Discounting of accounts receivable can make your working capital cycle shorter and can generate cash, albeit at a higher expense.
Business owners who may be unable to get a working capital credit line may turn to a short-term WC loan from a traditional bank.