How to Determine and Finance the Working Capital Needs?

Working capital is the lifeblood of a small business, it is the difference between the total number of assets and the total number of liabilities present in a small business. The working capital is hence spent on executing the ongoing operations for a small business. The successful businesses have a healthy availability of working capital cycle whereas it is the opposite in the chaotic businesses, it is clearly the health scorecard.

Here is how the working capital needs are determined for small businesses. A Retail Store needs working capital to order goods in bulk from the distributors and companies, and an e-commerce seller uses the working capital to order the new in-trend items directly from the manufacturers in bulk, to avail better margins. Similarly, for the hotels, it could be the amount needed to run the expenses and paying salaries to staff during a lean period.

For every small business, it is a challenge to identify a suitable cash strategy. For larger companies, there are many options for fast cash flow, but that’s not the case with small business owners.

Small Businesses need access to funds to cover up for their working capital needs and they have had only a few limited options to avail the same. The traditional lenders presented two major challenges before small businesses:

  • Collaterals

The traditional lenders ask for collaterals in form of home or office properties and since most small businesses run on a rented or leased premise it becomes virtually impossible for them to get access to these working capital loans from the traditional lenders.

  •  Slow Process

Another critical reason why the small businesses fail to access the working capital loans is the slow process of the traditional lenders, traditional lenders take a long time to process the working capital loans, they often need weeks and even months to process the same and require multiple documentations and branch visits from the small businesses. As the need for a working capital loan is most urgent and time-bound this slow process is a clear deterrence for the small businesses in getting the working capital loans.

The digital lenders are offering business loans without collaterals for small businesses and this comes as a huge relief for the small businesses as these loans help small businesses with various uses cases that involve working capital loans. The digital lenders also help small businesses to determine the various uses cases. Here are some of them:

  • Manage Lean Patches

Small businesses often come across the lean patches in the business, while some businesses are seasonal by nature, several others encounter the same as well. While the revenues go down, managers need to manage the basic expenses to run their business and this is where the business loans without collateral from the leading digital lenders help the small businesses by offering quick working capital loans with flexible repayments, where the small businesses have the flexibility to pay when they earn more.

  • Get New Customers

Small businesses have limited funds and thus in order to acquire new customers they need to arrange additional funds or get the working capital loans and this is where the digital lenders help the small businesses by providing them with access to quick business loans without collateral to reach out to the new businesses without blocking funds for the existing clients.

  • Inventory Management

Managing inventory is always a challenge for small businesses as it is a catch situation where the small businesses earn more by stocking additional inventory and ordering in bulk whereas it also blocks the funds for some time till the stocks are purchased by their customers. The working capital is needed to purchase inventory and payback every obligation that is done.

  • Seasonal Marketing

Small businesses need to promote themselves to reach out to new customers from time to time. This applies even more to the restaurants, hotels, travel agents, retailers, and the e-commerce sellers as they need to participate in various offers going on with the online aggregators and e-commerce platforms on which they do business. Sponsoring themselves means getting additional real-time traffic which results in instant revenue.


Working capital needs are very similar for every small business, so it is very important to know how to determine them and how to find a way to finance as well.  Digital lenders are an option that helps with business loans without collaterals to give more opportunities for small businesses to promote themselves without worrying about the funds.


Kiara Sanger

Kiara Sanger

My Name is Kiara. Having 5 years of experience in the industry, I am passionate about writing on different niche and industries.
Kiara Sanger

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