Smart Ways to Use Working Capital to Grow Your Business
The best uses of working capital produce revenue that exceeds the cost of the funding: buying discounted inventory, taking on a contract you would otherwise pass on, adding equipment or staff that increases capacity, or covering a short, predictable cash gap.
High-return uses
Bulk inventory at a discount, fulfilling a large purchase order, equipment that raises output, marketing with a proven return, and opening a location with demonstrated demand.
Uses to be careful with
Covering ongoing losses without a fix, paying off one advance with another without lowering the total cost, and personal expenses (which aren't permitted).
A simple test
Estimate the extra profit the funding will generate during the repayment term. If it comfortably exceeds the cost of capital, the deal likely makes sense.
This article is general education, not financial or legal advice. Terms vary by product and business.