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Working capital

Know what you need the money to do.

Before you look for working capital, get clear on what the money will do, how much it takes and when you’ll need it.

Tell SMB what the money is forBuild my loan checklist

SMB helps you prepare. It doesn’t lend or make credit decisions.

Riverbend Coffee · Funding need
We need $24,000 to get through January to March.
Payroll while sales dip, January to March
$13,500 · from your books
Rent and utilities, same months
$6,500 · from your books
Spring menu and supplies
$4,000 · estimate
Last winter’s weekly sales
Missing · check in Square
Total
$24,000

Questions to answer firstDoes the dip happen every winter? What would you cut first if sales drop further? When does cash come back in spring?

What’s the money for?

The reason changes how much you need, when you need it and what kind of money fits.

  • Get through a slow season

    Riverbend Coffee needs $24,000 for payroll, rent and supplies from January to March. Cash is back where it should be by July.

  • Stock up for a busy season

    Juniper Goods needs $40,000 for holiday stock and part-time help. Holiday sales bring the money back in December and January.

  • Wait for customers to pay

    Fieldwork Plumbing needs $32,000 for crew pay and parts while commercial jobs pay out, often weeks after each stage.

  • Buy equipment

    Goodwell Dental needs $85,000 for a second hygiene room. The equipment is paid in January, and the room starts earning in April.

See when you’ll need it.

Map the next 12 months from your books. Then compare the lowest point with the cash you want to keep.

  1. Map the next 12 months

    Cash in the bank each month, without any new money.

  2. Find the lowest point

    The month cash runs lowest, and how low it gets.

  3. Work out the gap

    The cash you want to keep, minus that lowest balance, is how much to cover.

Match the money to the need.

Each kind of money fits a different gap. Each lender sets its own terms.

  • Line of credit

    Borrow what you need, up to a limit, and pay interest on what you use. Good for gaps that come and go. Ask: are there fees to keep it open?

  • Term loan

    One amount up front, paid back monthly over a set time. Good for a one-time cost that pays off over years. Ask: is there a fee for paying it off early?

  • SBA-backed loan

    A lender’s loan that the U.S. Small Business Administration partly guarantees. Good for larger amounts and longer terms. Ask: which forms apply, and how long does approval take?

  • Equipment financing

    The equipment you buy backs the loan. Good for equipment with a quote. Ask: does it cover only the equipment, or install and setup too?

  • Supplier terms

    Your supplier lets you pay 30 to 60 days later. Good for stock you expect to sell soon. Ask: what are the late fees?

Before you borrow.

What is working capital?

On a balance sheet, it’s current assets minus current liabilities. Day to day, it’s the cash that keeps the business running while you wait for money to come in. Money customers owe you and stock on the shelf count as assets, but they can’t pay today’s bills.

How much working capital does a small business need?

There’s no single number. Map your cash for the next 12 months, find the lowest point, and compare it with the cushion you want to keep, like two weeks to a month of costs.

Can I use an SBA loan for working capital?

Some SBA-backed loans can be used for working capital. The lender, the program rules, your ability to repay and the terms decide whether one fits.

Is a line of credit or a term loan better for working capital?

A line of credit fits gaps that come and go, like a slow season or slow-paying customers. A term loan fits a one-time cost that pays off over years. Compare the total cost, fees and payment schedule, not just the rate.

How do I know if I can afford the payment?

Use the rate and term from a real quote, work out the monthly payment, and compare it with what a typical month leaves after costs. If the payment takes most of that, one slow month could make it hard.

What if customers pay later than expected?

Confirm when customers will actually pay, and agree on any new terms before you count on them. Don’t skip payroll, taxes or supplier bills to cover the gap.

What will a lender ask for?

Usually profit and loss for this year and the last two, a balance sheet, recent bank statements, business tax returns, quotes or orders for what you’re buying, and a list of loans you already have. Each lender’s own list decides.

Build my loan checklist

Start with what the money is for.

Tell SMB what the money would do. It helps you work out the numbers and get ready for a lender’s questions.