Working Capital Needs

A business’ need for working capital can come as a result of several reasons that include the following:

• Increasing sales growth or seasonal growth.

• Customers paying slower.

• Need to increase inventory to support sales growth and/or adding product lines.

• Desire to take discounts on purchases from vendors.

• Recent operating losses have reduced your cash reserves.

• Increased expenses due to additional marketing efforts, new employees, office relocation, etc.

It is important to identify whether this is a short term situation that will correct itself in less than twelve months or is it a permanent situation that will take time to rebuild cash balances.

Short term needs:  If your working capital needs are short term, then you need a line of credit from a bank.  The line of credit is interest only payments with flexibility to borrow, repay and borrow again as your cash needs dictate.  Accounts receivable and inventory are typically adequate collateral for this bank line of credit.

Long term needs:  If your working capital needs are permanent, we may be able to fulfill your needs.  NYBDC’s loan sizes range from $50,000 to $1,500,000. We are a complement to bank financing and do not compete with our partner banks.  Many loan structures include NYBDC, a partner Bank and other subordinate lenders, which can bring the total financing to exceed $5 million. We would make a long term working capital loan repayable over three to seven years with monthly principal and interest payments (see Loan Payment Estimator).  In most cases, we feel the company should also have a line of credit from a bank in addition to our working capital term loan.  The bank would typically have the accounts receivable and inventory as collateral for their line.  NYBDC would need to find other collateral in the business to secure its loan.  This collateral is typically machinery, equipment, furniture and/or subordinate collateral mortgages on real estate.