When it comes to running a business, one rule never changes: cash is king.
Even if your company is profitable, growth requires upfront investment—and day-to-day expenses don’t wait for receivables to come in. That’s why maintaining healthy working capital is essential for maintaining operational stability, building long-term success, and seizing new opportunities.
If your business operates in a capital-intensive industry like construction, transportation, oil & gas, or manufacturing, access to flexible capital can be the difference between staying stuck and moving forward. Asset-based lending (ABL) offers a powerful way to unlock liquidity using the equipment you already own.
What Is Working Capital?
Working capital represents the cash available to cover your company’s short-term operating expenses—such as payroll, fuel, materials, and rent. It’s one of the clearest indicators of financial health because it shows your ability to meet obligations and keep operations running smoothly. With solid working capital, your business is better equipped to manage shifting market conditions, handle unexpected costs, and move quickly when growth opportunities appear.
How to Calculate Working Capital
The formula is simple:
Working Capital = Current Assets – Current Liabilities
- Current Assets: cash, accounts receivable, inventory, and equipment expected to be sold or converted to cash
- Current Liabilities: short-term debt, payables, and upcoming financial obligations
A positive working capital balance means your business has enough liquidity to support daily operations and pursue new opportunities.
Understanding the Working Capital Ratio
Also called the current ratio, this metric indicates how well your business can handle short-term obligations. It’s calculated as:
Working Capital Ratio = Current Assets ÷ Current Liabilities
- Above 1.0: generally strong financial health
- Below 1.0: potential cash flow challenges
- Too high: possible underuse of assets that could be fueling growth
What Is a Working Capital Business Loan?
A working capital loan provides flexible funding to help businesses:
- Leverage opportunities
- Take advantage of growth opportunities
- Cover operating expenses
- Manage cash flow gaps
- Navigate delays in receivables
Traditional lenders rely heavily on long credit histories, strong financials, and predictable receivables—criteria that many equipment-heavy businesses don’t always meet. That’s why asset-based lending has become a preferred solution for companies needing fast, flexible capital.
Unlock More Working Capital With Asset-Based Lending
Asset-based lending allows businesses to leverage equity in their existing equipment or real estate to access substantial working capital quickly.
Unlike traditional financing, ABL is built around the value of your hard assets—not just your credit score or receivables performance.
Here’s how an asset-based lending facility supports your business:
1. Growth Financing
Banks often rely on receivables when underwriting working capital lines, but growth requires spending money long before revenue hits your books.
ABL lets you unlock cash from free-and-clear equipment, giving you the liquidity to:
- Take on new projects
- Expand your fleet or workforce
- Purchase materials upfront
- Scale operations without slowing momentum
2. Recovery & Turnaround Financing
Unexpected disruptions—like economic shifts, weather events, or industry downturns—can strain cash flow and interrupt operations. Getting your people and equipment back to work requires both planning and liquidity.
With ABL, you can use existing equipment to access capital quickly and rebuild with confidence.
3. Flexible Terms That Match Your Business Cycle
Industries with seasonal or cyclical revenue often struggle to fit traditional lending structures. Asset-based lending provides customizable repayment terms that align with your high and low seasons—helping you manage cash flow more effectively.
Put Your Equipment to Work—Without Selling It
At Essex Lease Financial Corporation, we’ve helped countless business owners transform idle or unleveraged equipment into the working capital they need to grow, recover, and operate with strength.
Our team takes the time to understand your operations and design an asset-based lending solution that supports—not constrains—your business goals.
Ready to Strengthen Your Cash Flow?
Unlock the liquidity hidden in your equipment and keep your business moving forward.
Talk to an expert at Essex Lease Financial Corporation today to get started.
