Click through even a couple pages on The Commercial Finance Group website and you’ll notice a term that keeps popping up: working capital. It’s easy to think that you know what this term means, after all it’s made up of two words with which you’re doubtless familiar, “working” and “capital.”
But in the world of commercial loans, working capital doesn’t simply mean capital that “does work.” It’s a bit more subtle than that. Working capital is actually a term used to describe a company’s current level of efficiency and the health of its short-term financial outlook.
The Working Capital Formula
To figure out your own company’s working capital (i.e. financial health) you’re going to have to do a little bit of math. The formula is listed above: Current Assets – Current Liabilities = Working Capital.
This formula can be used to discover whether or not your business has the short-term assets necessary to cover its short-term debts. If the difference is below 1, it means you have negative working capital, while an answer of over 2 means that assets might be sitting idle.
Asset-Based Lending From CFG Gives You More Working Capital
Want to know more about your working capital and how to maximize it so your business can grow even faster? Contact The Commercial Finance Group in Atlanta to learn more about our asset-based lending process and other solutions for small businesses. There’s no reason to let your financial inexperience slow you down!
We’d be happy to answer any questions you may have about your working capital and the small business lending solutions we provide.
