Funding Business Growth

May 21 2019 | PayPal Editorial Team

When you run a growing business, cash is king. Without cash in the bank, you can’t pay your bills or buy more stock to sell. Learn what “working capital” is all about and the latest solution from PayPal.

What is working capital?

If “capital” is the total of all the value in your business, then “working capital” is the portion you need to operate from day to day. It’s defined as current assets less current liabilities. Current assets are cash in the bank plus those things that will soon be turned into cash: your stock plus the money owed by customers (your debtors' list). Current liabilities are what you owe to suppliers and others.
 
If you want to grow your business, you need enough working capital (especially cash) to buy additional stock for sale and to invest in growing your business through developing and marketing new services and products. The problem is that your cash is often tied up in unpaid invoices and unsold stock.

3 steps to managing your working capital


1. Help customers pay you on time – Make it easy to get paid by sending professional, accurate invoices promptly. Make methods of payment clear and obvious and keep track of who still owes you. Don’t be slow in sending reminders if an invoice is overdue. Tools like PayPal Invoicing can help you create and keep track of unpaid invoices.
 
2. Help suppliers by paying on time – It might sound odd, but it makes sense. Building great relationships with suppliers will help you negotiate better prices, better payment terms, better shipping, bulk deals and bigger discounts.
 
3. Help yourself with smart stock management – Slow-selling stock ties up your cash while running out of fast-selling items means lost sales. E-commerce and EPOS software (like PayPal Here) provide reports of sales by product so you can forecast how much to re-order and when to place the order.

Growing your business

Even the best-managed businesses sometimes need a short-term boost to their working capital. For example, Fairygoodies faced the opportunity to secure an exclusive, Europe-wide, distribution deal from an important American supplier. It was too good to pass up but required cash they didn’t have.
 
Seasonality is always the challenge for Festival Glamping. Each year, they need to prepare for the festival season long before the summer cash starts pouring in. For phone accessory firm Finest Bazaar, the challenge was keeping up with growing demand. As owner Haider Ali says: “The more stock we have, the more we’ll sell. And, if we want to make more money, we have to hold more stock. Once you have your business framework right, it’s just about getting the capital: money makes money.”
 
Traditionally, businesses would approach their bank for a business loan. However, many find that this is neither the best nor the easiest solution for them. Loan terms of years rather than months and fixed monthly payments are also common frustrations for small businesses and many are exploring different options. It can be difficult to get to a local bank branch during office hours. As the owner of House of Party, Andy Hall, says: “There is no let up. I just can't get into a bank between 9 and 5, and I can’t afford the time it takes to complete lengthy loan applications. It frustrates me that banks seem to have no understanding of how business works today.”
 
Jane Gokgoz, the founder of Personalised Gifts Shop, feels the same: “Why not the banks? Because their process is so long-winded. My bank can see everything that comes into my account and everything that goes out of it, but it takes 6 weeks to 3 months for them to decide whether they’re going to give you financing. That’s not practical. It’s not workable.”

A new solution: Faster, easier business funding with PayPal Working Capital

For small businesses, technology has provided a convenient, business-friendly solution. PayPal Working Capital is an increasingly popular alternative to traditional banks. In fact, we’ve provided £1 billion of cash advances to more than 35,000 British small businesses since launching here in 2014.
 
And, 70% of PayPal Working Capital advances issued in the past year, all of which are made online, were applied for and approved outside traditional bank branch hours.
Interestingly, one-third of advances have been provided to small businesses in areas that lost 50 or more bank branches in the last 4 years. PayPal Working Capital provides a solution at a time and place that’s convenient for you.

Does it work? See what our small business customers say: 

“I can get better pricing by placing larger orders. Having PayPal Working Capital there gives you that power. And, it means I can pass on those discounts to customers.”
– Jane Gokgoz, Founder of Personalised Gifts Shop
 
“I always knew I was onto a winner, but PayPal Working Capital has made it achievable far more quickly. Without it, we wouldn’t be where we are today. PayPal Working Capital has helped accelerate our success.”
– Haider Ali, Founder of Finest Bazaar
 
“PayPal Working Capital has helped us to grow and keep up with demand. It’s a smooth operation and a helpful tool for business. Having working capital available that’s related to your level of sales is great. And, with repayments tied into our income, we repay it as money comes in. It’s more flexible than a traditional loan and we don’t need to worry about it. All in all, we love PayPal Working Capital.”
– Roger Brett, Owner of Festival Glamping
 
To learn more about PayPal Working Capital visit our website, here.
The information in these articles does not constitute financial, business or investment advice of any kind and does not count as a substitute for any professional advice.  Always do your own research on top and seek professional advice if you want to ensure that what you do is right for your specific circumstances.  Where we link to other websites, we can't be responsible for their content.

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