Looking For Working Capital? Don’t Forget These 5 Things

Looking For Working Capital? Don’t Forget These 5 Things
September 10 08:00 2015 Print This Article


This is an easy one; make sure you’ve got the appropriate business documents ready and handy as you start your search for working capital. You’re going to have to answer a few basic questions about your business, like monthly revenue numbers, and you have to be able to produce those documents within a day or so.


In a sentence, what’s your business about and how is it different from your competitors? Your potential lenders won’t need to see a documented business plan, but they will need to get an idea of the business, your products and services, its structure, your margins, etc. If you can’t quickly and articulately explain your business, it doesn’t help to expedite the lending process.


This one could also be called, “Lenders vs. Investors.” It’s important to be realistic about the amount of the working capital you’re seeking as it relates to the current revenue of the business.

Sometimes, a business will have $5,000 in weekly revenue, and they will be asking for a $100,000 loan. This will be a red flag to lenders; they’ll have big questions about where that capital will be going. At that ratio, you’re not really talking about a business loan – you’re really looking for an investor. If you go into the funding process with unreasonable expectations, you might turn off a prospective lender or source of capital.


Lenders like businesses who are responsible with their borrowing. One way to be a responsible borrower is by matching what you’re borrowing with the seasonality or revenue cycle of your business.

If you have a seasonal summer business, a retail shop down by the beach for example, aim to receive working capital in the spring, and to have it paid off during your busy summer season. The duration of your loan is really important here.

What you want to completely avoid is letting the payback schedule of that working capital linger past the revenue season it was designed to satiate. Otherwise, you’ll end up paying for last year’s expenses and raw materials out of this year’s revenue, which will really slow down your growth curve. The only major exception to this rule is if you’re investing in a new plant, new vehicle, or a major expense along those lines, then the payback schedule may be longer. Otherwise, you really should aim to match it to the revenue cycle of your business.


This tip is probably one of the hardest for businesses to accept. Even with a strong growth plan in place, and the tactics to get you there already in full swing, your funding will not be based on the promise of growth. A lender will only base your loan on the ability of the underlying business to support the payback of that loan.

For example, a lender is looking at a trucking company that currently has two trucks, and they’re looking for a loan to add a third truck. While that third truck should add about 50% to the business’s revenue in the growth plan, the lender will still look for the payback of the loan to be covered by the revenue of the existing two trucks.

Funding isn’t based on promise of growth. Yes, lender wants to know that the business has a growth plan, but they aren’t going to provide funding based on that projected growth.

Do you have questions about small business funding? Get in touch with a Funding Navigator at Market Street Funders today for a free consultation.

written by  Tommy Abel, Founder & Ceo of Market Street Lenders

written by
Tommy Abel, Founder & Ceo of Market Street Lenders