Title: How Much Working Capital Does a Small Business Need?
Headings: How Much Working Capital Does a Small Business Need?
How Much Working Capital Does a Small Business Need?
It depends on business type, operating cycle, and management goals
Key Takeaways
What Is Working Capital?
Business Type
Operating Cycle
Management Goals

Content: A company with a very high working capital figure, conversely, is easily able to pay all its expenses with ample funding left over. Whether a given business requires high working capital is determined by three key factors: business type, operating cycle, and management goals. Seasonal businesses require different amounts of working capital at different times of the year. Business Type
Certain types of businesses require higher working capital than others. Businesses that have physical inventory, for example, often need considerable amounts of working capital to run smoothly. This can include both retail and wholesale businesses, as well as manufacturers. Manufacturers must continuously purchase raw materials to produce inventory in house, while retailers and wholesalers must purchase premade inventory for sale to distributors or consumers. In addition, many businesses are seasonal, meaning they require extremely high working capital during certain parts of the year as they ramp up for the busy season. Leading up to the winter holidays, for example, retail businesses such as department stores and grocery stores must increase inventory and staffing to accommodate the expected influx of customers.