Working capital finance is one of those seemingly esoteric business school topics that turn out to have very real and rather fundamental applications for the small business owner with no training or prior experience except his or her own common sense. Any sole proprietor, as the term for these "moms and pops" goes in business school classes, knows about working capital finance from having to deal with inventory and accounting day in, day out! But when these small-time businessmen and women think of it, they are usually only imagining two things, borrowing money or putting more equity in their business - the traditional sources of business capital.

Yet most business owners don't realize that one of the greatest ways to finance working capital is to let their suppliers do it for them! There's no need for small business loan when the money is already there.

It's true, and this article will briefly outline how. But before we do any further, the usual legal disclaimers are necessary: what follows shall be understood as comprising of mere opinion only and should in no way be misconstrued as professional advice of any kind whatsoever by anyone for any reason! Readers are strongly urged to consult with all the relevant professionals, properly licensed and/or otherwise qualified, when making business decisions of any financial consequence, for neither the author nor the publisher shall be held liable in any manner for sharing information that is simply provided for "human interest" purposes.

All right, now with that out of the way, let's explore how working capital finance can be secured through one's own creditors!

The way to do this is, of course, by simply letting your suppliers finance your assets. If you think about it, suppliers typically finance working capital already, insofar as they deliver supplies but only receive payment at the end of the month (or even later, in some cases). Such a situation in effect frees up your money for other purposes, money that is literally working capital!

What you need to do is find a formula for calculating your supplies-to-finances ratio right now so that you can increase and maximize it to your benefit. One easy to understand formula for supplier-financed working capital is to multiply your total assets by a hundred (to generate an answer in percentage form) and then divide by the amount of your accounts payable (whether monthly or whatever terms you have secured).

One must "think outside the bank" to realize this strategy, but if you think about it, working capital finance is easy when carried on the backs of your suppliers - who have to participate, no matter what!