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Cash Is King

by Hilary Coman

August 9,2010

If you look up the term “working capital,” you’ll get some very complicated definitions:

· Working capital is a measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as current assets minus current liabilities. Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable, and inventory). (

· Capital actively turned over in or available for use in the course of business activity: a : the excess of current assets over current liabilities, b : all capital of a business except that invested in capital assets. (Merriam-Webster)

Small business owners know that defining working capital is far easier than getting it. Working capital is your business’s lifeblood because without cash on hand, business survival is impossible. I am not the only one ruminating on the importance of cash and the small business. The City of Charlotte, the Chamber of Commerce, and our local small business partners recognize the importance of access to capital to both sustain and invigorate our local economy.

To that end, on June 29, 2010, a sellout crowd attended the Access to Capital conference. A daylong event, the conference sought to: a) inform small business owners of the range of financing options available locally from large banks to angel investors, b) present owners with the range of small business resources available in the area, and c) host a sort of "speed dating" event between the various parties. The event ran along four tracks corresponding to the different situations in which a business might find itself: start-up, expansion, maintenance, and exit. Speakers and panels were provided corresponding to each track in addition to an exhibit hall that showcased capital resources and small business resources. A new business might just be getting off the ground while an established business either looks to survive or possibly grow. The reasons might vary, but the reality united many of the attendees - how can existing or potential small business owners find the cash we need to fulfill our goals? It may be aging accounts receivable, the loss of a critical client, or simply establishing the cushion needed to get through increasingly longer sales cycles. Without access to cash, running a business is almost impossible.

Typically, a business will tap either debt or equity to raise money, e.g., taking out a loan or bringing in investors. Getting a loan requires good credit, preferably assets to use as collateral, and banks like to see a positive trend in business revenues over successive years. Raising equity, other than the tried-and-true route of friends and family, requires a business idea or concern that shows enough potential and return on investment to merit investor involvement. So, if you’re not a potential Google with a sterling credit history, does that mean you can’t find money for your business? For many business owners, alas, that’s exactly what has happened.

The conference was an excellent starting point and a hopeful note that demonstrates that both public and private leadership recognizes the importance of capital to small businesses. Successful small businesses contribute to a vibrant and diverse local economy, but the last two years have been difficult for many in our ranks. Some businesses saw their markets and their clients simply disappear or curtail spending with them dramatically. Others maintained or grew their top line but restrained spending due to uncertain business conditions. I heard an amusing refrain during a recent conference call regarding woman-owned businesses. Given the hell of the last few years, the hope is for "Heaven in ‘11" - that small business will finally get over the hump and begin both aggressively spending and expanding. But that will not be possible without cash. Cash is king. Hopefully, the City, the Chamber, and their small business partners will continue to affirm this reality and work with both funders and small business owners to assure a heavenly dose for all of us.

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