Managing funds

3 Strategies of Working Capital Financing

One of the biggest challenges for new and growing companies is managing their working capital. Businesses with slow paying customers can struggle to build enough working capital to build assets as the company grows. One method to help with this issue is through working capital financing. This financing gives you the cash you need to keep things moving while you wait for outstanding invoices to be paid. There are three different styles of working capital management, let’s look at them now:

  • Conservative – This is the least risky method of capital management. Typically, you’ll have longer term loans with sometimes higher interest rates. It has the lowest liquidity risk, but also gives the lowest potential for funding rapid growth.
  • Hedging – In this concept, the loan terms will nearly match when the asset is maturing. It requires meticulous handling and planning so there’s no lapse in payment in either direction. In this setup, short term loans will finance short term assets, while longer term assets will utilize longer term loans. It takes more effort, but also offers the possibility of greater profitability.
  • Aggressive – An aggressive strategy for utilizing working capital loans for your small business in Birmingham, AL, will give you the greatest opportunity for profitability. It also comes with the greatest risk. In this case, long-term funds will finance your permanent working capital and fixed assets while the short-term funds will finance temporary capital and any remaining permanent working capital.

Depending on where your business is in its growth cycle will impact which style of working capital management you choose to use. It’s always best to consult with experts working capital financingto determine which method of working capital funding in Birmingham, AL, will work best for your business. You need to make sure you have enough liquid capital to keep your business moving while not entering a situation where you’re upside down and unable to pay off your loans when they are due.

Working Capital Financing Solutions

Small business owners face many options when it comes to financing their businesses. Working capital financing involves improving cash flow to allow for business opportunities. Whether adopting a conservative, hedging, or aggressive working capital management strategy, your business requires injections of cash to keep expanding.

Invoice Factoring as Working Capital Financing

Invoice factoring services improve a company’s cash flow. This allows the business to grow with enough working capital to cover the daily costs of operation. Invoice factoring, also known as accounts receivable funding, does not require a high personal or business credit score, a long time in business, or personal collateral. Instead, factoring companies evaluate your clients’ credit history and judge approval decisions on that.

How can you get more working capital for your business? Invoice factoring offers a growing funding source, but sometimes you need more cash immediately. Combining factoring services with purchase order financing can give your business the available working capital it needs to take on large volumes of sales.

Get Started

Curious about how invoice factoring can help your growing business? Improve your cash flow today to sustain your rapid business growth!

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  • Jeremy Thompson

    December 20, 2017

    It’s interesting to learn that there is such a term called working capital that companies must fulfill if they plan to stick in the game. Additionally, it might prove to be quite a challenge for growing companies due to slow paying customers as you’ve mentioned. That is interesting to learn as I would never have known about this otherwise. I surely need to read and study more about the business industry before even dreaming of competing in it. Luckily, though for those who are struggling there are still some ways to approach the issue, such as with the help of a working capital management. Thanks!

    • Ian Varley

      December 20, 2017

      Thanks Jeremy – we appreciate your comments!

  • FactorLoads

    January 9, 2019

    I totally agree with what you said. I believe that it is very important that we choose the right financing for our business in order for it grow. I also think that getting an advice from the professional is definitely a great help to avoid future problems.

  • Jenna

    January 31, 2019

    I think that it is essential to have a financing strategy for business working capital. These 3 strategies that you shared here is very helpful for business owners like me. Thanks for sharing this. This article is very comprehensive.

  • Pingback:Small Business Help: 3 Great Strategies For Working Capital Funding | Eagle Business Credit

  • Sandra Patterson

    June 18, 2019

    I thought it was interesting what you said about a conservative method being generally the lowest risk but gives the lowest chance of funding rapid growth. My sister has been looking into capital financing for her business within the last week or so, but is unsure how to actually proceed with it. I think that she should look around for someone that can help her understand what is best for her business, as well as read this article!

  • Philip

    July 12, 2019

    Great article.I also think that invoice factoring is a great financing solution for small businesses. Thanks for sharing this very informative article.

  • Pingback:Three Tips for Growing Your Business and Producing Results with Capital Funding | Eagle Business Credit

  • Kelly

    October 31, 2019

    Amazing! the article, Nice strategies.

  • Care

    November 8, 2019

    I was very pleased to find this web-site. I wanted to thank you for your time for this wonderful read!! I definitely enjoying every little bit of it and I have you bookmarked to check out new stuff you blog post.

    • Ian Varley

      November 8, 2019

      Thanks! We strive to put out content that is relevant to small business and small business owners. Let us know if there is a topic you would like us to cover!

  • Evelyn Wilson

    December 10, 2019

    First, Capital is an essential thing for the finance business. Clients are always trying to manage their money according to the time duration. Som time payment goes due too late as we expect. As I am a working finance manager with a free invoice generator app – moon invoice, I found many unresponsible clients.
    I this case we have to learn strategies like this. It’s really good to apply to be safe.

    • Ian Varley

      December 11, 2019

      Thank you for your comment, Evelyn. You’re right. A lot of invoices can be paid out late because of cash flow and timing. Forward thinking and financing your working capital can help ensure everyone is paid when they are supposed to be!

  • Pingback:Various Components of Calculating Working Capital | EBC

  • Stella Ray

    December 3, 2021

    For small business owners, it’s wise to be aware of good financing options that can help manage cash flow, enable a sizeable purchase, boost operations, or expand the business .


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