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First Northern Community Bancorp

07/16/2021 | News release | Archived content

Working Capital: What is it and why is it important

Working Capital: What is it and why is it important

Published: July 16, 2021

What is working capital?

Working capital is the capital of a business that is used in its day-to-day operations and is calculated as the difference between operating current expenses and operating current liabilities. A company's current assets include cash, accounts receivable, property, inventory of materials and finished goods and its current liabilities include accounts payable such as wages, rent, utilities, taxes, etc.

Why is it important?

Capital is essential for any growing business. Efficient working capital helps ensure your business runs smoothly and remains solvent. If your working capital gets too low, you risk running out of cash.

3 reasons why your business might need additional working capital.

  1. Seasonal differences in cash flow may require the need for extra capital to gear up for a busy season or to keep the business operating when there's less money.
  2. Funding obligations to supplies, employees, and the government while waiting for payments from customers.
  3. Improving the financial wellness of your business. For example, new or additional equipment may help increase production efficiency, allowing you to create more products at a faster rate.

Whether you're updating your facility, purchasing new equipment, expanding your fleet, or just need working capital, we can help!

With First Northern Bank's Lighting Loans you can apply for a Business Line of Credit or Loan from $2,500 to $50,000 all online in minutes! There's no need for you to visit the bank or gather financial paperwork.

If you have a business checking account with us, we simply need to identify you and your account. If you don't already have a business checking account with us, we can use the information from the business checking account located at your existing financial institution.

What are you waiting for? Get started now!