Working capital loans finance a company's everyday operations. Working capital loans are not used to buy long-term assets or investments. Working capital financing involves the funding of work from initial purchase order through to delivery of products and services. It includes materials buying, inventory, assembly, and shipment in combination with service delivery, invoicing, and collection. Working capital is critical to support the conversion of a company’s current assets into cash. 

Current assets, or trading assets, are amongst a company’s most liquid and financeable assets. Lenders' criteria, appetite, and pricing can vary widely, particularly between banks, non-banks, and private debt lenders. Lenders have unique approaches and preferences for evaluating receivables, inventory, and working capital financing.

Working capital challenges often arise if working capital availability does not keep pace with revenue growth or new projects. In other instances, liquid assets such as inventory and receivable calculation factors may be misaligned with the cash conversion cycle.

Structured Business Financing applies working capital analytics to develop financing options based on only liquid assets or in combination with other assets and security to support working capital requirements.

Common challenges:

• Thin capital base to support working capital for growth
• Business performance
• Management
• Losses
• Increased capital expenditures drain funds available for operations
• Accelerated sales growth 
• Small profit margin
• Owner withdrawals
• Long, complex or changing cash conversion cycle
• Shortened accounts payable terms
• Increasing expenses

Solution

While working capital needs can sometimes appear straightforward for a lender to assess, financing working capital is not usually a cookie-cutter solution. The anticipation of the issues together with an in-depth analysis of the short- and long-term assets, cash conversion cycle, and business sustainability and risk scenarios are  developed in our Lending Package.

We identify the likeliest financing scenario, expected pricing, and most suitable lender(s). To build a lending case, we draw on our previous experience within this financing class and drill down into the details to ensure alignment with each prospective lending solution.

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