Types of Working Capital

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Temporary Working Capital
If you could recall, your business needs capital during some specific times of the year, for example, in the festive season. Such a requirement, that is temporary and fluctuates according to a business’s internal operations as well as the external market conditions, is termed as temporary working capital.

In other words, you require not more than a short-term loan to finance your venezuela phone number list temporary requirements, which is repayable as soon as the cash starts rolling in. However, it’s never easy to forecast this kind of working capital.

Permanent Working Capital
Permanent working capital is everything temporary working capital is not. It is required to make liability payments even before your assets or invoices are converted into cash. This kind of capital is crucial as it is the minimum working capital required for your business to function uninterrupted.

While forecasting the value of your current assets is often challenging, it is possible to find a level below which a current asset has never gone. The current assets below this level are your permanent working capital. This can be done mainly on the basis of historical trends and experiences.