Six Words Describing Working Capital Finance

Working capital options have become an important topic for small business owners during the recent commercial lending crisis. These alternatives include merchant cash advances and working capital loans as well as analyzing if credit card processing costs can be reduced. To keep these explanations concise, we are providing a series of six-word descriptions about working capital management. Additional small business financing illustrations can be found in separate reports that include "seven words to describe commercial mortgage loans".

The first illustration of six words to describe working capital is "avoid a long and winding road". This refers to the importance of determining if business financing is actually available from the commercial lender in question. In the current business lending climate, it has become an unfortunate reality for commercial finance applications to take several months only to find out that funding is declined. Business owners should be prepared to watch for similar signs because such unnecessary delays have become so common. It should be possible to determine within just a few days if commercial financing is feasible for a specific business need, and the entire funding process should be finalized in three weeks or less.

As a second observation, "banks are not an effective solution" for almost any working capital financing situation. Business lines of credit are being routinely reduced or eliminated by banks in every region of the country. Most bankers have continued to state that they are providing normal levels of business financing when in fact commercial loan activity for banks continues to decline steadily. Whether a small business needs a traditional working capital loan or a merchant cash advance based upon credit card processing activity, the commercial lender willing to provide the funding is increasingly unlikely to be a bank. In fact, it has become common to hear phrases such as "thinking outside the bank" and "business loans without banks" precisely because bank financing for small businesses has become so hard to obtain.

The third description is "working capital management must be improved". Because other forms of small business financing such as commercial real estate loans have also been reduced or eliminated by so many banks, business owners will discover that working capital options now assume a higher priority. If a commercial mortgage cannot be refinanced to provide needed funding, short-term financing will become a mandatory "plan B" in most cases. This can result in unexpected improvements such as the real possibility of reducing credit card processing fees when obtaining business cash advances.

Because there are so many potential reasons for small business owners to be confused by recent business financing changes, the last example of six words describing working capital finance is "working capital experts will be necessary". The use of commercial finance experts would be a prudent step even without the current commercial banking problems. Finding a business financing expert to help should be a practical solution when commercial borrowers are also asked to deal with evaluating both new business funding sources and new working capital options.

This overview is one of several analyses about commercial loans and business banking problems. By describing working capital management difficulties in six words, this report was designed to produce a concise explanation of current cash management issues with a simplified approach. As noted above, while there are substantial difficulties to be expected with most current efforts to obtain working capital, the entire process should be more effective for small business owners when major business financing obstacles are both understood and anticipated.


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Stephen Bush is a working capital financing expert who has worked with business owners for 30 years. AEX Commercial Financing Group provides business cash advances and small business financing programs