Working capital
Also called: working capital loan
Working capital is the cash a business has to cover its day-to-day costs, calculated as current assets minus current liabilities.
Working capital is what is left to run the business after you subtract short-term obligations from short-term assets. Positive working capital means you can cover payroll, rent, and inventory without scrambling. Negative working capital means money is leaving faster than it comes in.
In financing, a working capital loan is short-term funding used to close those gaps, for example covering payroll through a slow season or buying inventory before a busy one. It is a true loan with a set payback schedule, which makes it easier to budget against than funding tied to a percentage of sales.
Common questions
How do you calculate working capital?
Subtract current liabilities (debts due within a year) from current assets (cash, receivables, and inventory). The result is your working capital.
Is a working capital loan the same as a line of credit?
No. A working capital loan is a lump sum repaid on a schedule. A business line of credit lets you draw, repay, and reuse funds as you need them.
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