Working Capital: What Every SME Owner Should Understand
Working capital is not “some extra money for the business.” It is the capital required to move goods, invoices and cash through a cycle without starving operations.
Start with the cycle, not the amount
A manufacturer who holds inventory for 90 days and collects in 60 is in a different conversation from a trader who turns stock in 20. The same rupee figure can be conservative for one and excessive for the other.
Lenders, at their best, are trying to see whether the facility funds the cycle — or plugs a hole that will reopen next quarter.
Three moving parts
Inventory, receivables and payables. Stretch any one of them and the need for external working capital changes. GST filings and banking should tell a consistent story with the cycle you describe.
What “more limit” cannot fix
Chronic losses, disputed debtors, or capex quietly funded from cash credit. Those are structure problems. Working capital is a poor substitute for term finance, and a worse substitute for profitability.
This note is educational. It is not a credit offer. Facilities remain subject to lender assessment.