Why are SMEs considering Working Capital Finance for Higher Growth?

Financial Support
14 Mar 2022

Working Capital Finance is a credit facility designed to improve the working capital cycles of SMEs. Working capital is the amount of cash that is available with any SME so that they can safely run their day-to-day operations. It is calculated by subtracting the current liabilities from the current assets. Only those assets are considered as working capital that can be quickly converted into liquid cash. This is the primary meaning of working capital. 

Working capital finance is used for various purposes, sometimes to ensure that growth projects run smoothly but most of the time to ensure that day-to-day operations aren’t an obstacle to the efficiency of the company. The use of working capital varies vastly through different kinds of businesses. Although the general idea behind working capital is that it frees up money for immediate growth purposes that can be later recovered. 

Working capital financing is majorly done through working capital loans, invoice finance, overdrafts, revolving credit facilities, and some more financial instruments that help in freeing up immediate cash. It is because of the easy understanding and accessibility to working capital financing that SMEs are considering it for higher growth. Let us see how working capital benefits SMEs growth to understand it better:

  1. Fuels short-term day-to-day needs: Working capital loans are easy to acquire and help SMEs instantly meet their short-term goals. The repayment criteria for working capital loans are also usually very flexible and don’t put any addition on the business.
  2. Eliminates collateral: The biggest advantage of working capital loans is that they are unsecured so they wouldn’t require the risk of putting up something as collateral. A number of times SME owners fear putting up their valuables at stake to get capital for their businesses. Working capital finance helps them free up from that burden and think freely in terms of growing their business.
  3. Quicker Financing: Fintech startups like Oxyzo Financial Services these days have made it the easiest thing to receive working capital loans for SMEs. You can apply for the loan online and would only have to submit certain necessary documents and after that, you’d be eligible for a loan. Any SME wouldn’t require to run around banks to get capital for their next big order.
  4. Preserves ownership: Usually, while attempting to secure funding for business projects, SMEs end up putting up sharing a part of their project and thus giving up their sole ownership for a small funding amount. Working capital loans don’t require SMEs to do that. They provide the required funding without asking for any part of ownership. You will remain the sole proprietor and would lead your business to grow in the decided direction without interference. 

These are some of the ways why SMEs are considering working capital finance for the growth of their small and medium-sized industries. The easy-to-use quality of these loans makes them the best option for any SME to consider whenever they require financial help. This is why working capital finance has become a pathway for SMEs’ higher growth. 

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