How to Find Working Capital: 5 Unexpected Places to Look

Working capital is essential for small to mid-sized businesses. Fortunately, there are many places to find it when you need it — and some may even come as a surprise.  

A business needs cash — or working capital — to fund daily operations such as payroll, rent and inventory. As a business owner, ensuring you have enough working capital by managing your income and expenses can be a delicate balancing act. 

Whether you’re struggling with inflation and rising labor costs or need an injection of cash to take advantage of growth opportunities, working capital can help. Increased working capital can help your business through a slower season or uncertain times, or it might let you invest in an opportunity with high profit potential.

Traditional lenders such as banks and credit unions are often the go-to source for business owners seeking working capital financing. However, rigid qualification requirements and long processing times can mean they aren’t always an option for everyone. 

Fortunately, there are many other places for small to mid-sized businesses to find working capital. 

Here we’ll cover 5 unexpected places to look for working capital

1. Supplier discounts

One place you might not think to look for extra working capital is the realm of discounts and other perks that may be available to your business. Depending on your business classification, industry and vendor terms, there may be opportunities for you to save costs, win lucrative contracts or form beneficial partnerships.

In fact, many large corporations have implemented policies to help level the playing field for disadvantaged businesses. For instance, Fortune 500 companies like Walmart, UPS, Hilton and IBM have extensive diversity and inclusion programs to engage, support and create opportunities for minority businesses. Moreover, Target recently announced a commitment to spend more than $2 billion with Black-owned businesses by 2025.

Increased working capital can help your business through a slower season or uncertain times, or it might let you invest in an opportunity with high profit potential.    

Numerous benefits come with being certified as a minority-owned, woman-owned or sustainable business, from access to special business training to a preference for contracts with government entities. For example, Walmart has recently sourced more than $13.1 billion in goods and services from diverse suppliers, committed $100 million over the next five years to the Walmart.org Center for Racial Equity and expanded access to affordable working capital for qualified diverse or minority-owned suppliers through an early payment program. 

Think you may qualify for a supplier discount? Obtaining a minority business enterprise (MBE), women-owned business (WBENC) or sustainability certification is a great first step as it is among the most common prerequisites for approval in these programs.

2. Peer-to-peer lending

Peer-to-peer (P2P) lending is a form of financing that enables businesses to borrow money without going through traditional avenues such as a bank. These platforms connect businesses that are seeking working capital, equipment financing or other funding with individuals looking to lend. 

Rather than borrowing from a single institution, with peer-to-peer lending, a business can borrow from many individual people. Sites like Funding Circle and Lending Club act as an intermediary between investors (who supply the funds) and borrowers. For some, P2P lending can be a more accessible source of funding than traditional loans, especially for borrowers with low credit scores or limited credit history that do not meet the rigid requirements of conventional lenders. 

Additionally, P2P loans sometimes offer better interest rates because of the greater competition between lenders and lower origination fees. If you think a P2P loan may be the best fit for your business, it’s important to ensure you develop a thorough understanding of how the process works and carefully compare all options prior to signing any contracts. 

3. Asset-based lending

As an alternative to peer-to-peer lending, you might consider an asset-based lending program. Asset-based lending is a loan secured by an asset or other collateral. Assets could include your accounts receivable, inventory, securities, property or a piece of equipment.

Asset-based lending is a loan secured by an asset or other collateral. Assets could include your accounts receivable, inventory, securities, property or a piece of equipment.

Because this type of working capital financing is secured against an asset, lenders often consider it to be less risky, and therefore may offer a better interest rate and terms for the loan. The total loan amount is typically determined by the value of the asset with a formula known as the loan-to-value (LTV) ratio. The LTV ratio represents the proportion of an asset that is being debt-financed, and it is calculated as:

You might also be asked by the lender to provide financial statements, accounts payable and accounts receivable aging summaries and other information based on your specific situation. As your eligible receivables and other collateral grow, there’s potential for your credit limit to grow as well. Programs like C2FO’s Capital Finance solution offer flexible working capital financing with reasonable rates and terms and can be combined with other programs like the C2FO Early Payment solution.

4. Equity crowdfunding

Equity crowdfunding is a unique way to obtain working capital for your business without increasing new debt. If you find yourself unable to qualify for sufficient working capital financing due to credit issues, revenue limitations or other lender requirements, equity financing can be an alternative to consider. 

While similar to other crowdfunding platforms, this form of fundraising differs in that it targets potential investors to provide capital in exchange for a financial stake in your business. Equity crowdfunding is regulated by the US Securities and Exchange Commission (SEC), and although you’re not selling shares, you are still offering equity to investors in return for capital.

If you find yourself unable to qualify for sufficient working capital financing due to credit issues, revenue limitations or other lender requirements, equity financing can be an alternative to consider. 

As a result, the process entails more rules than you would encounter with a simple online fundraising campaign like GoFundMe or Kickstarter. Note that you must use an SEC-registered funding platform like CircleUp or EquityNet if you wish to solicit funds from the public in exchange for equity in your company. 

If you’re considering creating an equity crowdfunding campaign for your business, you might start with researching and comparing platforms and reading tips for building a strong campaign. 

5. Dynamic discounting programs 

An often-overlooked way of increasing your working capital is to get paid faster by encouraging your customers to pay their invoices sooner. Early payment platforms, like C2FO’s, let you easily view your outstanding invoices and request payment from your customers online.

These platforms typically allow you to choose the level of discount you offer customers as an incentive for early payment. This way, you can exercise more control over when your business is paid and optimize cash flow. Early payment programs generally offer lower-cost access to capital than alternative funding sources — so you get fast, simple and affordable access to the working capital you need. Interested in leveraging early payment to accelerate cash flow for your business? Learn more or get started by searching for your enterprise buyers today.  

In summary

Whether your business is experiencing rapid growth that requires additional working capital to cover increased operational costs or you need an emergency injection to cover a seasonal shortage, it may be easier to obtain working capital than you expect. Ultimately, there are plenty of unique working capital financing sources and strategies outside of the traditional options to help you find the funds you need. 

Choosing the right one depends on your industry, business goals and circumstances.