What is Working Capital Funding?
Working capital funding is aimed at augmenting a business’s working capital. Entrepreneurs often use it to invest in a new market, take on a larger contract, or other expansion initiatives.
Different businesses use this type of funding for different purposes, but in general, the idea is that using it makes cash for growing the business available. Ideally, you get returns on this cash in the short- to medium-term.
What is Working Capital?
Types of Working Capital Funding
Working Capital Loans
This is a popular type of working capital funding among businesses that offer their clients credit terms. It is based on the money owed to your company. Typically, you obtain a portion of the value owed via the whole debtor book or a single invoice.
This type of funding is based on high-value assets, so you won’t usually be required to involve your home or offer a personal guarantee. The funding amount depends on what the items used to secure it are worth.
Supply Chain Finance
Supply chain finance is based on buyers’ creditworthiness. The lender pays the supplier immediately, but the buyer can postpone payment. The lender and not the supplier bears the payment delay.