How to Finance and Optimise Your Working Capital (BFR)

Introduction

Your working capital — or BFR (besoin en fonds de roulement) — is a vital measure of your company’s financial health. If it’s not managed carefully, even profitable businesses can experience cash flow tension that hinders operations and growth.

In this guide, we’ll help you:

• Understand what working capital is

• Identify the reasons it fluctuates

• Learn how to finance a positive or negative BFR effectively

• Avoid common mistakes that could destabilise your business

What is working capital and why does it matter?

Working capital represents the money your business needs to finance its operating cycle — in other words, the cash required to pay suppliers and staff before your customers pay you.

A positive BFR means you’re spending money before it comes in, which is common in:

• Construction and production companies

• Agencies or consultants on long-term contracts

• Retailers with high inventory needs

📊 How to calculate your working capital

The basic formula is:

Working Capital = Inventory + Accounts Receivable – Accounts Payable

Example:

• Inventory: £50,000

• Receivables: £100,000

• Payables: £70,000

➡️ Working Capital = £50,000 + £100,000 – £70,000 = £80,000

This means you need £80,000 available to fund your current operations.

Why high working capital can become a problem

If your working capital increases suddenly, and you’re not prepared, you may experience:

• A cash shortfall

• Late payments to suppliers or tax authorities

• Missed growth opportunities

• Pressure from creditors or lenders

This is especially dangerous for fast-growing SMEs that don’t forecast cash flow variations regularly.

How to finance your working capital

Here are four popular options to bridge a working capital gap:

✅ 1. Business cash flow loan

• Short-term (1 to 6 months)

• No collateral or personal guarantee

• Suited for urgent or recurring needs

✅ 2. Bullet loan (lump sum repayment)

Great for businesses with upcoming client payments. Borrow now, repay when the money comes in.

✅ 3. Inventory financing

Useful when large orders or seasonal peaks force you to hold more stock than usual.

✅ 4. Confidential invoice factoring

You sell your unpaid invoices for immediate cash — without your client knowing.

FinHub vs traditional banks

📈 Real-life example: Working capital under pressure

A food wholesaler sees demand double in Q4. They need to purchase more stock and hire extra staff, but customer invoices are on 45-day terms.

➡️ Their working capital requirement doubles

➡️ FinHub offers a £50,000 loan over 4 months

➡️ Cash flow is stabilised, growth continues without delay

Best practices to manage your BFR

✔️ Track it monthly

Use a cash flow forecast that includes working capital calculations.

✔️ Negotiate better supplier terms

Longer payment windows ease pressure.

✔️ Incentivise fast payments from clients

Offer early settlement discounts or use automated reminders.

✔️ Finance peak periods in advance

Don’t wait until you’re squeezed — secure funds beforehand.

FAQ – Working capital finance

💬 Is negative working capital always a problem?

Not necessarily. It can be efficient if you get paid faster than you pay suppliers — but in some cases, it signals poor planning.

💬 Can I access funding if I’m not profitable?

Yes. FinHub evaluates your real-time activity and cash flow, not just your bottom line.

💬 Is working capital financing suitable for small businesses?

Absolutely — especially those with high customer payment terms or fast growth cycles.

💬 How long are the loans?

FinHub offers durations from 1 to 6 months, with bullet or monthly repayments.

Conclusion

Managing your working capital is critical to staying financially healthy and operationally agile. Whether you need to fund a stock purchase or handle longer payment terms, having the right financing in place ensures business continuity.

FinHub provides fast, flexible funding that adapts to your BFR needs — no paperwork overload, no personal guarantees.

✅ Bridge your working capital gap with FinHub – get a decision in 24h.