The significance of working capital for expansions

That one important factor:

Besides the fuel that fires you, there is something more important to help you realize your BIG dream and that is to generate or be able to generate working capital for your business which has already germinated in your head but needs to be transplanted into the real world to be able to get the adequate sunshine and water for it to bloom and provide shade not just to you and your dependents but also to a lot of other people who will benefit it in myriad ways in the form of employment, opportunities or even improved products and services.

So, what is hampering you?

If you were to dismantle all the processes of setting up a successful business, perhaps the most daunting of them all is the first step and that is to set up a working capital for the business. In the simplest of terms, working capital is the first investment that you put into your dream enterprise. In the widest sense, it could mean any amount of capital that you put in into the business to realize either a short-term or a long-term goal.

Here is an example why an enterprise can need working capital albeit even after a roaring startup:

Case study:

Smith and Wilbur is a partnership firm that deals in niche stationeries. Smith is of the opinion that they need to increase their shop space and also their warehouse space to accommodate more stocks. Wilbur knows that it is high time they expand physically but they have no extra cash to accommodate any more buying of real estate.

Now, the adjacent shop owner is in dire needs and decides to sell his shop. As a pre-emptive right, he asks Smith and Wilbur if they would be interested in acquiring the place before he puts it on the block. The two partners know that they are lucky but for the shortage of funds!

They decide to go in for a loan to infuse some more working capital in order to buy the land. Why they think acquiring working capital from outside is worthwhile is that if they try to downgrade investment in stocks, they could lose out to competition.

In course of time, they identify a bank and apply for a loan. Fortunately, the requisites for a loan are all fulfilled and in time they get enough money to acquire the neighboring place. In a couple of months, they have erected a superstructure expanding their business premises as well as their storage capacity. Smith and Wilbur are presently doing really well as they are able to attract great custom based on the size of their enterprise as also with their variety in stock!