Working Capital In Business Plan

What is Working Capital in Business Plan?

The lifeblood of any business, working capital refers to the money available at your disposal to meet present and short-term needs. It refers to liquid funds in the form of cash or deposits that you keep to address daily operations. A critical business metric, working capital is also a measure of the ability of your business to pay short-term debts.

Importance of Working Capital Management
Now that you know what working capital is, let’s understand the importance of its effective management. Its importance is not restricted to just one aspect. Doing so helps you to:

Plan for Funds
A holistic view of your working capital, you can plan for funds accordingly. When you know the likely expenses to be incurred at present or in the future, you can chalk out the need for funds accordingly. If you are likely to incur a shortfall, then you can apply for an unsecured business working capital loan to overcome cash crunch.

Aids in Decision Making
An accurate estimate of your working capital and its management helps you and your finance team to appropriately manage the available funds and decide how much to spend in the near-term. The right estimate allows you to save and pay off your obligations with utmost ease.

Improves Creditworthiness
When you have adequately planned for your working capital, the same aids in timely payment to your vendor and lenders if any. This not only strengthens relationships but also enhances your creditworthiness in the market. It helps you obtain a customizable business working capital loan, should you need funds in the future.

Builds Credibility
It’s through working capital that you pay your employees and vendors, among others. Effective management of working capital helps you make timely payments to them, thus building your credibility. It also motivates your employees to walk the extra mile for the organization and go beyond their call of duty.

Working Capital in Business Plan
While formulating a business plan, you must make adequate provisions to lay your working capital needs and identify its sources. While the sources could be cash credit, bill discounting, trade deposits, and notes payable, among others, the plan must also include the different types of working capital that are as follows:

  • Permanent Working Capital:Also known as fixed working capital, it includes the minimum current assets that are required to keep operations running.
  • Variable Working Capital:This refers to the extra working capital that’s used for various operational expenses.
  • Reserve Margin Working Capital:As the name suggests, this capital is kept as a reserve for unforeseen expenses coming your way. This working capital helps you to meet liquidity needs in an emergency.
  • Special Variable Working Capital:It refers to the extra working capital that your business needs for fulfilling objectives such as launching new products, effectively managing risk, and undertaking marketing campaigns, among others.

Types of working capital

Need for Additional Working Capital
Sometimes, your business may warrant additional working capital. For example, you may need additional working capital to pay vendors and suppliers during peak business season. In such a scenario, you can avail a business loan for working capital.

Such loans are also known as unsecured business capital working loan as you don’t need to pledge any security to your lender. All you need to do is to fill up an application form and upload the relevant documents. Upon successful validation, the loan amount is disbursed and credited into your account.

The loan also comes in handy when you are undergoing a cash crunch due to non-payment from customers or experience a dip in business due to black swan events like the Covid-19 pandemic. The funds received help you to sail through tough times and meet your obligations.

Poonawalla Fincorp offers working capital loan for business growth in a jiffy at a competitive rate of interest. Call us on our toll-free number 1800 266 3201 or write to us at to know more.

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