How to determine your working capital needs?

2 min read

Working capital refers to the funds you need to ensure smooth business operations. It is essential to estimate your working capital requirement accurately as it would affect your business liquidity.

Consider these factors to determine your working capital needs:

  • Nature and type of business
  • Scale of operations
  • Production cycle
  • Credit availed and allowed to customers
  • Seasonal factors that affect your business cycle
  • Operational efficiency
  • Financial buffer required for contingencies
  • Competition and growth prospects

Once you determine your needs, consider availing of a working capital loan from Bajaj Finserv. Get access to a large loan amount and repay the funds over a convenient tenor.

Additional read: What is working capital

Additional read: Working capital management

Additional read: Net working capital

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Frequently asked questions

How do you calculate working capital needs?

To calculate your working capital needs, evaluate your current assets and liabilities. Subtract your current liabilities from your current assets to determine your working capital. This calculation will show the funds available for managing day-to-day operational expenses and short-term debts. Analyse your sales patterns, production cycles, and market trends to understand your business's specific working capital requirements, enabling more effective financial planning and management.

Why is working capital needed?

Working capital is essential for businesses as it ensures smooth daily operations, covering expenses like wages, raw materials, and utility bills. It also assists in managing short-term liabilities, providing a safety net during cash flow fluctuations and enabling businesses to seize growth opportunities and handle unforeseen financial challenges.