Working Capital: Business Finance for the Future

Self-Employed | 17 Jan, 2020

January is the time for new beginnings, fresh starts and a clean slate. It’s the time where, as business owners, we look ahead to our goals for the year, and start to build on our past successes. Unfortunately, for many of us, it’s also a time when we’re scrambling to recover from end of year financial stresses. Now is the time to consider business finance in the form of working capital.

In a recent study of small Australian businesses, 37% of respondents felt stressed because of the financial pressure that the end of year and holiday season put on their business. This pressure flows through to the start of the new year, giving many business owners the feeling of starting off on the back foot.

It doesn’t have to be that way. Small and medium businesses can take advantage of working capital finance to future proof their business.

Working Capital for Financing

Working capital to finance business needs is the number one reason that small Australian businesses take out a loan. And rather than being something that we turn to in the event of an emergency (like a sudden inability to pay wages), it is better used as funding to help us through times where we know our business may struggle (future proofing us against those times when we know we may struggle to pay wages). The end of year is historically one of those times.

In the study referenced above, 57% of respondents did believe that working capital funding would help their business thrive through the end of year and throughout the holiday period. However, only 17% said that they  would proactively seek out the needed funding.

So, why aren’t more SMEs seeking out this helpful funding?

SMEs see working capital business finance as a Band-Aid.

Many business owners see working capital loans as a Band-Aid – a way for businesses with bad credit or bad cash flow to help pay their bills, their employees or make other large purchases. These businesses are reluctant to enter into negotiations with their bank (which can be needlessly time-consuming and difficult). And they’re hesitant to take on debt that may be viewed as a failure.

However, we should view the need for working capital financing as a failure to thrive. Instead, it should be viewed and used as a proactive method of meeting your financial obligations. The Australian Securities and Investments Commission reports indicate that 40% of failed Australian businesses were due to inadequate cash flow and lack of capital.

When used well, working capital financing can help bridge the cash flow gap in your business during the historically lean times. It can remove some financial pressure allowing you the space to create a successful business.

Higher interest rates are a worry.

Many business owners won’t actively seek out working capital business financing because they worry about the higher interest rates that come with some of these loans. While higher interest rates are often part and parcel with short term loans generally, it is important to remember to offset these costs against your business’ opportunity cost.

In other words, what are you losing by not having enough cashflow to adequately fund your business? Perhaps you’re losing out on the opportunity to grow your business. Perhaps you’ll be unable to purchase new stock for your business when demand outweighs supply. Or perhaps you’ll be unwilling to part with precious cash flow to update ageing technology.

It’s necessary to weigh the financial costs of taking out a working capital loan. But it’s just as important to consider the value of what you may be missing out on by not having money in your pocket.

Your finance broker can help you compare interest rates (and other product features) across lenders and determine the best for your needs.

Benefits of a Working Capital Loan

There are many benefits to obtaining a working capital loan. Firstly, it’s a pressure release valve for the financial stresses that the end of year can bring. Additionally, most lenders also offer an easy online application process, flexible repayment terms and variable loan terms. And it is incredibly quick. Applicants for this type of loan generally need the money fast. So, once the lender approves your application, the money will be quickly deposited in your account. Sometimes in as little as one day.

Yes, it can be a little bit more expensive, but often that cost is well worth the value received in investment in your business.


A working capital loan can be a savvy business decision for many SMEs, particularly if it is utilised well. We should think about loans as financing the future of our business, rather than fixing up the mistakes of the past. And a working capital loan can be a smart piece of that financial puzzle.

Are you keen to release financial pressure with working capital business finance? Get in touch. We can help you find the best solution for your business.


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