6 Common Ways to Raise Working Capital for Your Business

As per a report, the working capital management of the top 500 top-listed companies was impacted in 2020, primarily due to sluggish economic growth. However, these businesses have opportunities to free up to Rs.5.2 lakh crore from working capital to maintain a healthy cash reserve. 

Hence, besides knowing what is working capital, Individuals need to curate a business plan that ensures uninterrupted daily business operations. To address the shortage of funds, they should also consider several options available to raise working capital for business. 

6 best ways to raise working capital for a business 

The working capital of a business is the indicator of its financial standing. However, it is the working capital turnover ratio that illustrates how efficiently a business uses its resources. 

However, besides checking the ratio, business owners should also know the popular and convenient ways to raise working capital: 

  1. Angel investors 

Individuals or selected organisations with high net worth often invest in small businesses with impressive growth prospects. Usually, they offer financial assistance one-time or continue to invest. However, in exchange, they seek a share of business ownership as a form of equity. 

Before approaching angel investors, individuals need to have a detailed and clear pitch deck that proves their business’s efficiency and potential turnover in future. 

  1. Invoice financing 

If your business working capital suffers from unpaid invoices as customers take a long time to pay, this is one of the financing solutions you can consider. You can collateralise the unpaid invoices to financial institutions and avail funds against them. 

Usually, the lenders deduct a certain percentage of invoices as service fees. With this funding option, you can cover the cash flow for short-term cash crunches. However, before borrowing, you should first know how much working capital does your business need. 

  1. Contract financing 

In this option, you get cash upfront to fund operations for an approved contract. Due to high sales volume, the companies often experience a deficit in working capital funds or face cash flow issues. In such cases, this financing option proves beneficial.  

Before extending the fund, the financiers conduct a background check of the client to ascertain credibility. Moreover, they also charge interest linked to prime and also for drawing up documents of cession. 

  1. Business credit cards 

Since working capital helps business stay agile, it is necessary for entrepreneurs to act almost immediately in case of a dip in this fund. With this payment card, business owners can access instant funds. The business costs typically come with high borrowing limit that allows business owners to sail through the rainy days. 

However, missed or delayed bill payment accumulates penal interest as well as affects the business and personal credit score. 

  1. Government schemes

Once you are aware of what is working capital, individuals should know that Government offers several schemes to financially support small businesses. For example, they can consider Pradhan Mantri MUDRA Yojana (PMMY) that extends credit to non-corporate and non-farming micro and small enterprises. 

However, depending on the eligibility, the maximum loan available through this scheme is Rs.10 lakh. Also, business owners need to meet stringent eligibility criteria to qualify for this fund. They also need to submit a solid business plan to prove the repayment capacity. 

  1. Business loans 

One of the best ways to replenish the working capital fund is by opting for a business loan. Almost all leading financial institutions offer business loans at competitive interest rates. Besides, this credit product also accompanies a host of benefits like Flexi loan facility, collateral-free high financing, prompt loan approval and disbursal, etc. 

With this fund, business owners can hire skilled workers, fund new goods or service launches, purchase raw materials, invest in technology, etc. 

NBFCs like Bajaj Finserv also provide pre-approved offers that make loan processing straightforward and quick. Besides business loans, these are also available on a host of financial products like personal loans, credit cards, etc. Enter your name and contact number to check your pre-approved offer online. 

These are some of the best ways to raise working capital for your business. However, you should also adopt financial habits to ensure equilibrium between current assets and liabilities, besides merely knowing what is working capital.