Are you applying for working capital loans? Before filing a loan application, it is important to know the amount of working capital you need to cover your business operations in the next 12 months.

Working capital loans can help you pay for your accounts payable and other short-term obligations, when your capital dips too low. Here are factors that will determine the working capital your business needs in the next 12 months.

Annual growth

What is the percentage of growth that you expect in the next year? To compute the annual growth, identify the value of your investment at the beginning and the end of the period. Next, subtract the beginning value from the end value of your investment. Divide the difference by the beginning value, and then multiply the answer by 100 to get the percentage of annual growth. For example, on January 2017, your investment value is $10,000. You expect it to double on December 2017. The percentage of annual growth would be 100% ($20,000-$10,000=$10,000/$10,000=1 x 100=100%).

Current assets

Current assets refer to cash, securities, accounts receivable and other assets you can convert into cash when the need arises.

Existing liabilities

Business-related expenses such as wages, rent for facilities, taxes, cost of supplies, and other required expenditures are current liabilities.

Target current ratio

Divide your existing assets by current liabilities to check if your working capital is enough to meet your immediate financial requirements. These include increasing sales and inventory, delayed customer payments, operating costs, emergency equipment purchase and office repairs and more.

An asset of $30,000 and liabilities amounting to $15,000 means that your current ratio is 2. You need a current ratio of at least 2.0 because anything lesser than that indicates that you are financially incapable of paying for your current financial obligations. In such case, our working capital loans can help you.

There are other factors to consider in the computation, depending on your situation and the computation above is just an example of basic target working capital. Talk to our credit specialists to have a deeper understanding of the process.

You can avail of ALC Commercial’s flexible working capital loans to cover various business funding issues such as marketing and relocation expenses, tax payment, wages and any other business-related expenditures.

Working capital amount

Let’s take the examples above. With an annual growth rate of 100% and a target current ratio of 2.0, you need a working capital of $30,000 in 12 months to weather financial difficulties. Meaning, you need to double your initial working capital. Spread the amount in twelve months to check the target working capital every month. In the example above, the working capital required in the first month is $15, 892, $21,213 on the sixth month and $30,000 on the 12th month.

Do you want to avail of our working capital loans but you have no financial documentation such as tax returns and collateral? Have you been declined by banks and other lending institutions because of bad credit or no credit history? If you answered “yes” to the above questions, we can help you with fast cash through a working capital loan!

Contact us today and avail of our FREE ASSESSMENT and a no-obligation consultation which won’t affect your credit rating.