How to access working capital without owning a house

Accessing working capital can feel difficult for some

Understanding your working capital needs is key to unlocking the growth of your business, but knowing how to access it can be tricky. If you don’t own a home or an asset you can use as collateral, banks and traditional lenders usually won’t be able to help.

Here’s a quick rundown to help you understand if you need more working capital, and how to access it hassle-free.

What’s considered a healthy working capital ratio?

Generally, a business needs a positive working capital ratio (you can calculate this by taking your current assets and dividing that by your current liabilities).

Theoretically, a working capital ratio of 1.0 indicates that a business should be able to adequately meet all of its short-term obligations. However, most businesses (as well as analysts, banks, and accountants) will want to see a slightly higher number.

Excess working capital will give a business a cash cushion against any unexpected expenses, and can be reinvested to help business growth. A ratio below 1.0 indicates a business’s current assets aren’t enough to cover short-term bills, and could mean the business needs additional external funds.

A healthy working capital ratio is generally considered to be somewhere between 1.2 and 2.0, indicating a good amount of liquidity and overall financial health.

If your business has a lower ratio, a working capital loan can help bridge between debtor cycles and payment cycles. Banks and traditional lenders will usually require a house or asset to secure a business loan, which means that many SMEs are locked out of finance options.

Small and medium businesses are under increasing pressure

Xero’s recent Small Business Insights found that in any given month, about half of Australian small businesses are cash flow negative, with more money exiting the business than entering.

Cash flow is particularly tight in January, as businesses replenish their inventory. Many businesses, big and small, halt trading during January, meaning that outstanding invoices can sit unpaid until February or March, further straining cash flow.

Find out how a business loan from Moula can help you access working capital

According to Digital Finance Analytics’ 2017 SME Survey, the average debtor period for small and medium businesses is now more than 50 days, a number which has been rising each year.

The survey also found that 57% of SMEs seeking funding are looking to borrow for working capital support. These figures show that Australian small businesses are in need of working capital more than ever before.

Accessing finance: The struggle is real

The same survey shows that banks and traditional lenders are making it more difficult for SMEs to access finance. Sixty-six per cent of SME owners don’t own a property, meaning they can only apply for unsecured finance.

However, unsecured business loan applicants now face a 74% rejection rate, up from last year, where businesses had a 67% likelihood of being rejected by traditional lenders.

Stephen Allen of Scotty’s Wholesale Meats was in need of working capital to get through the holiday season, but after applying for a loan at his bank, was declined.

“We’re being restricted because of the way that banks view small business,” says Allen.

“We could pick up another 20 customers a week. But to fund that, we would have to give them at least 30 days credit. We pay our meat bill for seven days. To go and create that extra business, you have to have an extra $150,000 available to you. The main line banks just don’t seem to get that. I find it very frustrating.”

How to access working capital with no paperwork and no hassle

If your business needs more working capital to get through the next few months, an unsecured business loan can give you that support. But waiting six to eight weeks for the bank to process your application isn’t your only option.

Nowadays, you can access a working capital loan online, and access funds within 24 hours, with no messy paperwork.  Quick, smart.


Moula is a better way to borrow money to grow your business. We use a combination of heads and hearts to identify good business, and make fast lending decisions. After all, good business deserves Moula.

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