Working Capital

Written by Linda Alexander
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The amount of working capital a business has often determines whether a deal will be successful or not. Ironically, it is not always when a company is in trouble that it is in dire need of capital. Often, working capital is needed to ensure the success of a potentially large deal.

A company cannot buy supplies necessary to begin a project without the necessary capital. Thus, a deal that potentially could be profitable may never happen at all. Businesses without assets are not always eligible for bank loans. So it is often necessary to find alternate ways to fund a business.

Managing Working Capital through Factoring

Of course, companies that are taking a turn for the worse can also have trouble with cash flow. In these cases, factoring is one way to get through the need for cash. When you sell off your accounts receivables at a discount, you immediately receive the cash that is owed to you, and the factoring company collects the balances from your customers.

You are free to use the money to fund your project or to pay off some of your company's bills. As you can see, this has a large effect on the status of your working capital. Keeping the cash flowing is an important part of managing business. Whether you need it to flow for a profitable project to begin, or if you simply need capital with which to operate your business, factoring can provide immediate relief.

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