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Working capital

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Working capital: definition

As part of operating assets, working capital represents the difference between current assets and current liabilities, such as accounts payable and accrued liabilities. It describes how liquid a company is.

Working capital: optimization

To determine the amount of working capital, entrepreneurs must carry out a valuation of current assets. From the determined value, they subtract current liabilities. The goal is to achieve a positive working capital value.

To increase cash, founders can use a working capital business loan or a working capital credit. Alternatives such as re:cap's recurring revenue financing can also be useful to optimize liquidity.

What other founders achieved with re:cap

While validating funding options to accelerate our growth we came across re:cap’s financing line and quickly realized it’s exactly what we needed: full flexibility and full control at attractive conditions. The process was transparent and fast (days, not months) which allowed us to focus on our core business.
Artur Hasselbach
CFO at Talentsconnect
For us as a company with recurring revenues from offering both hardware and software-as-a-service, re:cap's financing option is a great tool for cash flow management. In addition to that, the financing process was quick and uncomplicated.

Frederik Merz

CBDO & Co-Founder at

In the first instance, we used the flexible liquidity buffer gained through re:cap to finance long-term marketing and sales activities that we would not have been able to tackle until later without re:cap. We are pleased to be able to continue using re:cap for flexible growth, for example to expand our sales team.

Dirk Brockmeyer

Executive Partner at Tabtool

re:cap has enabled us to get access to funding in an incredibly fast and transparent process. Also, I really like the business insights dashboard which helps us to understand and improve our funding terms. I would recommend every founder to look into re:cap as a financing partner.

Tobias Hagenau

CEO & Co-Founder at awork

With re:cap, we were able to get non-dilutive funding at an early stage which is great for every startup founder. The whole process was simple and fast, and we look forward to a long-term partnership in building Meisterwerk.

Bertram Wildenauer

CEO & Co-Founder at Meisterwerk

Optimize working capital

Innovative working capital financing for SaaS companies. With re:cap, you can use your future revenues to finance investments in marketing, sales or personnel.

What is net working capital?

Net working capital is also called net current assets and answers the question of which part of a company's assets is used to generate short-term revenue. It includes cash and cash equivalents, resulting in the following calculation: current assets - cash and cash equivalents - current liabilities = net working capital.

Difference between working capital, liquidity, and current assets

The terms 'working capital' and 'liquidity' should not be used interchangeably. There is a connection; however, working capital acts as a measure of (potential) liquidity and tells us how solvent companies are.

A conceptual distinction from current assets is important because current assets only cover the asset side - for working capital, the liability side of the balance sheet is also relevant.

How can companies influence working capital?

Good working capital management is multifaceted. Basically, companies should invoice quickly and collect payments consistently. To maintain a positive value, working capital financing is also a good option - especially for growing companies, which thus expand their room for maneuver.

However, the value should not be too high because that would indicate an unfavorable use of working capital and too much tied-up cash. To lower it, companies can, for example, reduce their own inventories or negotiate a deferral of payment with suppliers.

How re:cap works

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Use working capital for different purposes

Generally, working capital aims to optimize cash flow. Typical examples of working capital are: Personnel, Marketing, Sales, Inventory, and Research.

How can I calculate the working capital?

To calculate working capital, current liabilities are subtracted from current assets. The formula is therefore: current assets - current liabilities = working capital. Here, current means liquidatable within one year.

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Convert up to 50% of your ARR into instant upfront cash and complement your capital stack.


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What is working capital?

Working capital is also called operating working capital. It is the difference between current assets and current liabilities and, as a balance sheet ratio, provides information on companies' capital stock and financial strength.

What does working capital tell us?

The working capital figure shows which funds are tied up in regular company operations - it can also be used to determine whether working capital financing is necessary.

Is high working capital good or bad?

A positive value shows that current assets can cover current liabilities - this is important in terms of the golden rule of the balance sheet. A negative value conveys a risk, because affected companies are considered to be illiquid. This can lead to financial bottlenecks.

Can working capital be too high?

The question of working capital levels is answered differently depending on the company or business model - especially across industries. However, working capital levels that are too high often indicate that working capital is being used less wisely and that too much cash is being tied up.

What are examples of working capital?

In business management, working capital is usually indirect and long-term goods that companies need for their products and services. A distinction is made between tangible resources, such as warehouse and office space, and intangible ones, such as licenses.

How does working capital financing work?

Working capital financing allows companies to increase their working capital and generate positive value. It provides them with short-term cash to pay liabilities or make investments.

What are the different working capital options?

Working capital financing is multifaceted. Depending on the industry and business model, various types may therefore be considered, such as drawing on the credit line, receivables credit, factoring, and inventory lending. Increasingly popular are alternative solutions such as non-dilutive and non-restrictive sales-based financing.