How Working Capital Reserves Keep Your Business Safe

By March 26, 2020 Factoring
working capital

Businesses of all sizes enjoy sales and the revenue that follows. New, small, and even large businesses are vulnerable to cash flow issues, which is why it is important to build up working capital reserves.

Keep Credit Ratings High and Liabilities Low

One way to build up working capital is to avoid taking on new liabilities if possible. Financing, such as short-term loans, may provide the capital needed at the moment, but the debt and lowered credit ratings can prevent businesses from getting larger financing when they really need it. Building up capital reserves can help smooth out cycles and provide extra money when it’s needed most without impacting credit ratings or placing debt on the balance sheet.

The Economy Is Unpredictable

Everyone has a perfect understanding of economic events in retrospect, but no one can truly predict how things are going to play out in the future. During periods of economic growth, businesses of all sizes and types can benefit. During economic downturns, however, the shake-up can take some drastic directions, and lenders become more reluctant to provide financing. Businesses should build up working capital reserves for both economic highs and lows. During a boom, capital reserves can allow businesses to grow. When the economy swings the other way, they will be able to weather the storm and come out on the other side. Having ample working capital on-hand gives your business extra security and peace of mind.

Cash Flow Is Square One

The ability to build up working capital reserves is tied directly to cash flow. A business that experiences lag between sales and revenue due to staggered payment schedules will not have the opportunity to build up capital. The reason is that what’s already in the reserves is going to cover overhead and other obligations between client payments. A simple way to eliminate lag is to use factoring. Factoring turns unpaid invoices to cash within a single day which boosts cash flow and allows businesses to meet financial obligations and build up capital reserves.

Build Your Working Capital Reserves Today

Single Point Capital is a nationwide provider of factoring services. We can factor your receivables within a single day so you can access your funds quickly and build up capital reserves to safeguard your business against the future, or take advantage of growth opportunities. Contact Single Point Capital today to get started.

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