Key takeaways
- Map the cash-conversion cycle first
- Short repayment requires a fast return
- Recurring gaps may require operational changes too
Calculate the operating gap
Measure the time between paying suppliers or employees and collecting from customers. The length and variability of that gap should influence product choice.
Document the assumptions behind this part of the decision and compare them against the actual financing agreement. Terms, eligibility, and legal treatment vary by provider and product.
Connect the use to a return
Inventory, marketing, staffing, and project costs generate returns on different timelines. Repayment should not peak before the investment can reasonably produce cash.
Document the assumptions behind this part of the decision and compare them against the actual financing agreement. Terms, eligibility, and legal treatment vary by provider and product.
Choose a structure
A line of credit can suit repeat needs; invoice financing can fit qualified receivables; a term product can support a defined campaign or seasonal build.
Document the assumptions behind this part of the decision and compare them against the actual financing agreement. Terms, eligibility, and legal treatment vary by provider and product.
Fix repeated pressure
Financing can bridge a gap, but repeated shortages may also require pricing, billing, collections, inventory, margin, or expense changes.
Document the assumptions behind this part of the decision and compare them against the actual financing agreement. Terms, eligibility, and legal treatment vary by provider and product.
Important
This guide is educational and does not provide financial, legal, tax, or accounting advice. SourcePoint is a marketplace, not a direct lender. Review provider-specific terms and seek qualified advice where appropriate.
Frequently asked questions
Is working capital only for emergencies?
No. It can be used proactively for seasonal inventory, hiring, marketing, and project mobilization when the expected return and repayment plan are clear.
What is net working capital?
It is commonly calculated as current assets minus current liabilities. Financing decisions also require attention to cash timing and the quality of receivables and inventory.