Sources of Working Capital a Top Challenge for Companies

Securing reliable working capital in sufficient amounts is usually the top business challenge today for companies with revenues of $2–200 million. Viewed from a macro level, working capital constriction for this group of companies is a significant problem for the U.S. economy as a whole.  Businesses of $2–200 million in revenue account for roughly two-thirds of private sector workers and 45% of business revenues in the U.S. according to U.S. Census data, yet less than 5% of capital markets activity is devoted to funding them,  leaving a substantial financing gap. And that gap has only increased during the global financial crisis, which has further restricted access to capital — which has increased the risk of becoming unsustainable for some businesses.

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Sources of Working Capital a Top Challenge for Companies

Securing reliable working capital in sufficient amounts is usually the top business challenge today for companies with revenues of $2–200 million. Viewed from a macro level, working capital constriction for this group of companies is a significant problem for the U.S. economy as a whole.  Businesses of $2–200 million in revenue account for roughly two-thirds of private sector workers and 45% of business revenues in the U.S. according to U.S. Census data, yet less than 5% of capital markets activity is devoted to funding them,  leaving a substantial financing gap.  And that gap has only increased during the global financial crisis, which has further restricted access to capital — which has increased the risk of becoming unsustainable for some businesses.

Continue reading “Sources of Working Capital a Top Challenge for Companies”

Bonding Requirements — What Interests a Surety Company Most?

Once found mainly in federal contracts, bonding requirements have become more widespread and require significant financial discipline. Unlike a lender, which is concerned about a borrower’s overall financial stability, a bonding company focuses a company’s ability to perform on a specific job(s). The surety wants assurance that a job is on course with project estimates as to time, costs and estimated gross margin. In the short term, a surety will view a contractor’s job status schedule more importantly than the company’s overall financial statement.

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Working Capital Management is Always Crucial

As levers of financial management go, none bears more weight than working capital. The viability of every business activity rests on daily changes in receivables, inventory, and payables. It’s the lifeblood of the business, and every financial manager’s primary task is to keep it moving and put capital to work efficiently and effectively.

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