Working capital solutions for B2B companies
The most common working capital question we hear is some version of: my business is profitable, so why am I always short on cash? The answer is almost always timing. You pay for labor, inventory, and freight today; your customers pay you in 30, 60, or 90 days. The gap in between is the working capital gap, and it widens every time you grow.
Short answer: B2B working capital problems are usually financed, not saved your way out of. The main tools are a revolving line of credit sized to your receivables, receivables financing or factoring, inventory and purchase-order financing for product businesses, and structured term capital when the gap is too large for a borrowing base alone. The right structure is the one whose repayment timing matches your collection timing.
Why growth makes it worse, not better
Every new dollar of B2B revenue has to be financed before it is collected. Win a contract that doubles your billing and you have doubled the payroll, materials, and overhead you carry during the 30 to 90 days before payment arrives. This is why fast-growing companies feel poorer than slow ones, and why the most painful no in business is turning down a big customer because you cannot float the ramp-up. Working capital financing exists precisely so growth funds itself: a receivables-based facility expands automatically as you bill more.
Size the gap before you shop for the fix
A rough but useful measure: take your average accounts receivable balance, add inventory if you carry it, and subtract your average accounts payable. That is the capital permanently tied up in your operating cycle. If it exceeds the cash and availability you actually have, the difference is your gap, and it explains the payroll scrambles. Knowing the number matters because undersized facilities fail slowly and expensively; the business outgrows them and reaches for stopgaps like merchant cash advances, which convert a timing problem into a debt spiral.
The structures, from simplest to most involved
- Asset-based revolving line. Receivables, and sometimes inventory, set a borrowing base; you draw against it and collections sweep the balance down. Availability scales with billing. Typically the best fit for companies with $1M+ in B2B receivables. Details in our ABL guide.
- Receivables financing and factoring. Individual invoices are advanced or purchased, commonly at 80% to 90% of face value. Works at smaller scale and for younger companies. See accounts receivable financing.
- Inventory and purchase-order financing. For distributors and product companies, capital against stock or against a confirmed PO, sometimes up to 100% of the cost of goods for strong orders.
- Structured term capital. When the gap includes retiring expensive debt or funding a step-change in scale, a term facility layered with a revolver. See structured capital.
Matching repayment to collection is the whole game
The reason merchant cash advances destroy B2B companies is not only price; it is that fixed daily repayment collides with lumpy monthly collections. The reason revolvers work is the mirror image: you owe interest only on what is drawn, and the balance falls automatically when customers pay. When evaluating any working capital offer, ask one question first: what does the repayment schedule assume about when my customers pay me? If the answer is daily and your customers pay on net-45, the product is wrong for your business regardless of the rate.
If the bank already declined you
Bank working capital lines are underwritten on financial ratios, history, and often hard-asset coverage, which excludes many healthy, asset-light B2B companies. Private and asset-based lenders underwrite the receivables themselves: who your customers are, how reliably they pay, how clean the aging is. A decline from your bank narrows the aisle, not the market. Our guide on financing after a bank decline covers the path in detail.
Common questions
We are growing faster than our working capital. What should we do?
First size the gap, then finance it with a structure that scales: a receivables-based revolver grows automatically as billing grows. The mistake to avoid is fixed-payment debt, which finances yesterday's size, or turning down growth because the current facility is maxed. Growth-driven cash strain is the most financeable problem in this market.
My business is profitable but debt payments are consuming my cash flow. What are my options?
That is a capital structure problem, not a profitability problem. The usual fix is restructuring the debt so repayment matches collections: refinancing short-term obligations into a revolver or term facility. If the payments consuming you are MCA debits, start with our MCA refinancing guide.
How much working capital can we raise against our receivables?
Commonly up to around 90% of eligible receivables, where eligible generally means B2B invoices under 90 days old to creditworthy customers. On $1.5M of eligible A/R that is roughly $1.35M of availability at the top of the range; advance rates vary by lender, industry, and customer concentration.
What is the minimum size where this makes sense?
Structured working capital facilities generally start around $1M, which typically corresponds to $1M or more in outstanding receivables. Below that, factoring and selective receivables financing cover the same need at smaller scale.
Do working capital facilities require giving up equity?
No. Everything discussed here is debt or receivables financing. Keeping the upside is the point: you solve a timing problem with a facility you reuse, rather than selling permanent ownership to fix a temporary gap.
Growing faster than your working capital?
Tell us where things stand. A Modavva advisor will review your situation confidentially, at no cost and with no obligation, and come back with whether and how it can be restructured. Typically a same-week first response.
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