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September Newsletter

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What Small Businesses Can Learn From Large Businesses About Working Capital Management

With interest rates having been historically low since the financial crisis in 2008, Central banks have gathered with some making the case for increasing interest rates. On Thursday August 25, 2016, Central Bankers have converged on a small mountain resort in Grand Teton Wyoming(http://www.reuters.com/article/us-usa-fed-fiscal-idUSKCN1100BJ)to discuss monetary policy. A couple of top Federal Reserve officials have taken the chance to push for interest-rate hikes, citing an improvement in inflation and employment.

Dallas Fed President Robert Kaplan told CNBC “the case is strengthening” for a rate hike. He added, “you should conclude from that in the not too distant future… I think we are moving toward being able to take another step.”

Kansas City Fed President Esther George had an even stronger message. “I think it is time to move,” she told Bloomberg TV. The Federal Reserve Bank has been hosting this conference on Central Bank monetary policy in Grand Teton Wyoming since 1978.

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Working capital management by large businesses

Large businesses have always had access to more capital than smaller businesses. Wall Street and capital markets are not readily available as sources of funding for small businesses. As corporate debt and capital markets have become more expensive to larger businesses, working capital management has become increasingly important to these businesses. With interest rates starting to slowly creep upward and the talk of interest rate hikes, larger companies have placed a renewed emphasis on working capital management.

What cues can small businesses be taking towards working capital management?

In light of the actions being taken by large businesses towards working capital management, what can small businesses be doing? While not as financially sophisticated as large businesses, there is an argument that working capital management is even more important for small businesses. With fewer funding options available, small businesses often don’t have the financial cushion to absorb a financial shock that large businesses do exposing them to a great deal more risk.

Historically, small businesses have had to rely on owner’s equity, credit cards, and family and friends to fund day-to-day business operations. Many businesses still haven’t learned about the benefits that working capital loans can provide. According to a survey of small businesses by CAP Capital, 87 percent of small business owners have never tried obtaining working capital from an online finance provider. This statistic highlights the need to educate small businesses on alternative sources of funding. More importantly, it highlights the need to educate these same businesses on the need to better manage their working capital needs.

We, here at Zip Capital Group will be doing our part to help small business owners to manage the working capital needs of their business through education and awareness.

If you are in need of a working capital loan for your business, please contact us as we can help you secure a loan for your business within a matter of hours.

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