Working Capital: Create Your Own Without the Government’s Help
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Working Capital: Create Your Own Without the Government’s Help


Let’s suppose that we have arranged a 15-minute interview between just you (a small business owner) and President Obama (and maybe a couple of secret service agents…). Assume that the first 5 minutes of the interview revolves around EVERYTHING non-business related: your family, your town, kids, etc. But then, in the remaining 10 minutes, Obama wants to hear from you about how he can help you to be more successful in your business.

What would you tell him?

The answers to this question are an extremely good indicator of the top challenges facing small business owners today. More importantly, these insights can help you determine which challenges you should try to solve first as a competitive business owner. After all, America became a superpower as a result of the ingenuity of private enterprise, not reliance on government intervention, right?

So, let’s take a look at the challenges facing small businesses. Obviously there is not much you can do immediately about healthcare costs or tax rates: they are what they are. Nevertheless, many challenges that business owners encounter can be transformed into competitive advantages through information, innovation, and persistence at the business level. For example, if, as with most small businesses, access to working capital is one of the first issues that come to your mind, then re-evaluating your business practices will give you an advantage in the market while others await government intervention. Even if Obama manages to get the banks to increase their lending activities and stimulate the economy with more money, you really don’t want to operate your business on the edge, vulnerable to political whims. Yet, by carefully examining your daily operations, you will find many ways to innovate your practices that will improve your cash flow. Here’s a guide on what to do when no-one seems to want to give you the capital to grow your business.

You Don’t Need the Government: Create Your Own Working Capital

The capital that you can generate through your own business operations is the cheapest form of working capital there is. So, before you go to any lender for financing, you need to make sure that not a single penny is wasted in your operations. Here’s a list of common working capital leaks and how you can plug them before they will cost you your business. They may be as simple as renegotiating some of your utilities, looking at the type of rent you are paying every month or making a few changes in your hiring and employment policies. No business operates with perfect efficiency. We all waste a lot of money. In fact, operational inefficiency is such a common problem that there are hundreds of thousands of consulting companies helping businesses to improve their financial operations. Yet, you will be surprised to see how much instant working capital you can find on your own by simply reviewing your operations carefully.
After plugging the leaks, the next line of attack is your receivables. If your customers don’t pay you for your products and services, you will go out of business. And, if you can’t make them pay you on time, you will suffer on the margins as long as you are in business. Just like anything else, this problem can be overcome with a couple of quick, but crucial fixes. Here’s a useful guide by Janet Attard on Amex OPEN platform about how to get paid faster. The recommendations don’t require significant business resources or time investments from your end, yet they will yield sound, effective results and immediate access to working capital.
Banks are convenient, but there are other financing options out there. They may be more expensive, but if you minimize your exposure and use them only for a short period of time, you can minimize the cost you have to pay them in order to capitalize your business. Just because banks stopped lending does not mean all working capital sources have vanished. They might not be as visible as your local bank, but they are around and may be more attractive options than a traditional lender. In fact, some won’t even ask you for any money until you put their capital to work! Depending on the kind of business you operate, some of these options will fit your business better than others. Scroll through the list below (in alphabetical order):
– Business credit cards (See a list of common business credit cards here)
– Friends & Family
– Leasing & Factoring
– Merchant cash advance and pawn stores (While these lenders have been stigmatized, more and more people are strategically taking advantage of their services. See this week’s Newsweek article)
– Online lending platforms (iBank or OnDeck Capital)
– Peer-to-peer lending ( or
– Receivables financing (The Receivables Exchange)
– SBA Programs (Here’s an overview of SBA Loan Programs)
Depending on your business profile, you will almost always qualify for one or more of these working capital sources. Be mindful, however, that some of these sources are VERY expensive and running your business entirely based on the working capital coming from these sources might be a fatal mistake. You should always think about what kinds of returns you will receive when you put their capital to work, and then compare it to the cost of the working capital you are getting from them. You should carefully review their terms and make sure you can pay them back with your cash flow from operations. But always remember, the cheapest cash is the one that your customers owe you! Of course it wouldn’t hurt if the government would solve our problems for us, but there is still a lot we can do ourselves, and a competitive advantage to be gained by doing it right.

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