How Much Working Capital Does My Small Business Need?

Working capital is the amount that your small business needs to cover the gap between its assets and liabilities. That sounds simple, and it looks nice and tidy in a Business 101 textbook.

The much harder part, is taking into consideration the fact that your small business is not a static thing that “lives on a spreadsheet”. It’s a dynamic and constantly changing entity, which means that your working capital needs can be relatively small one month or quarter, and much larger the next.

In light of the above, generally speaking the best way to determine your working capital needs is to identify your operating cycle cash requirements via a historical analysis. If possible, look back at least one year. If not, then looking at the last quarter (if your small business is a start-up) may be sufficient.

Essentially, you want to identify whether your projected revenues, which derive from all of your sales and business lines, will cover your projected costs, which include rent, salaries, operating expenses, inventory, and so on.

While you don’t want to look too far ahead – since, as noted above, the small business landscape can change very quickly – you want to get a sense of what the next 3 or 6 months will look like in terms of your working capital needs.

Then, once you’ve identified a realistic amount – which, again, is not how much working capital you want to have, but how much you believe you need to have – your next step is to fill the gap with a business loan. There’s some bad news and good news about this.

The bad news is that your bank may say no – and if your business has been operating for less than 2 years, approval will be difficult. What’s more, even if you are fortunate enough to be approved for a bank loan, you’ll need to secure it with collateral, and the loan administration process can take months. It’s definitely not a quick process. If you thought standing in line at the bank was an eternity, try taking out a small business loan!

The good news is that you can apply for a working capital loan through Mulligan Funding right now, simply by completing our streamlined 1-page online application. We welcome start-ups that have been in business at least 9 months (after all, Google and Apple were new businesses once!), and damaged or bad credit will not necessarily disqualify an application, nor will a discharged bankruptcy. We don’t require any collateral, either.

If your working capital loan application is approved, and once you accept the transparent terms, we’ll have the funds in your account within a matter of days. And if you discover that you need additional working capital to cover a larger-than-expected gap, or perhaps to take advantage of a golden opportunity, you can apply for a second loan. And rest assured that we do NOT charge double fees.

Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.