- Working capital is the amount of money available for the day-to-day operations of a business.
- Working capital is used to pay for regular expenses, such as utility bills, insurance, employee payroll, rent, inventory, and advertising/marketing costs.
What is the definition of working capital?
You can calculate your business’s working capital by subtracting the business’s current liabilities from its current assets.
The working capital calculation is:
- Working Capital = Current Assets – Current Liabilities.
- Net working capital = current assets (minus cash) – current liabilities (minus debt)
- Net working capital = accounts receivable + inventory – accounts payable.
You may need additional working capital to:
- Pay expenses
- Pay debt
- Take advantage of business opportunities
- Invest money ahead of seasonal changes
- Increase business health with cash on hand
SBA Micro loans and SBA 7(a) loans can be used to fund working capital for business borrowers.