Glossary
Working capital
Working capital is current assets (cash, receivables, inventory) minus current liabilities (payables, accrued expenses). In practice, it is the cash a business needs to pay its bills while waiting to be paid by customers.
In many small-business sales, the seller keeps the cash and receivables, so the buyer must fund working capital from the first day. In an SBA deal, financed working capital is part of the total project cost, which raises the required equity injection.
The trap: forgetting it. A profitable business can still run out of cash in its first months under a new owner if working capital was not planned.