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Working Capital (Definition)

The accounting meaning first (formula), then how “working capital loans/finance” is used in funding conversations.

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Related terms

Compare alternatives → Business Line of Credit / Invoice Finance

Helpful context: See our guide on business loan terms (types, typical terms, and what changes approvals).

Working capital is an accounting measure of short-term liquidity — what your business has available to keep operating right now. The standard definition is:

Accounting definition
Working capital = current assets − current liabilities

In plain English: it’s your short-term buffer after you account for near-term bills (suppliers, wages, BAS/ATO, rent).

You’ll also hear “working capital” used in a product sense. Working capital finance / working capital loans are used to cover operating costs, smooth cashflow gaps, or bridge timing between expenses and customer payments — and that product intent belongs on Working Capital Loans.

Working capital loan (what it is)

A working capital loan is typically a term-based cashflow loan used for day-to-day funding needs (wages, stock/materials, supplier invoices, BAS/ATO), usually over a defined term (often 3–24 months).

It’s one of the three core cashflow levers alongside Business Line of Credit and Invoice Finance. If you want the combined strategy view, start here: Business Cashflow System (LOC + WCL + Invoice).

Why this matters in real businesses

Working capital moves up and down naturally — especially in hospitality, construction, trade services, freight, and healthcare. That’s why Google often mixes “definition” and “funding” intent for the same term.

Common “funding” use cases include:

  • covering wages and payroll
  • buying stock or materials
  • paying BAS/ATO obligations
  • managing supplier invoices
  • bridging seasonal dips

For examples by industry: Café Hub, Tradie Hub, Truckie Hub, Whitecoat Hub.

How working capital loans work (simple)

  • Lenders review bank statements and cashflow conduct.
  • Limits/amounts are sized to repayment comfort and existing exposure.
  • Repayments can be daily/weekly/monthly depending on structure.
  • Security may be unsecured or supported by general PPSR charges (product-dependent).

Related glossary terms: Fixed Rate, Variable Rate, Comparison Rate.

Related Switchboard resources

For official business guidance, visit business.gov.au.

Is working capital the same as cash?
No. Cash is one current asset. Working capital includes other current assets (like receivables and inventory) minus current liabilities.
Why does Google show “working capital loans” on a definition page?
Because “working capital” is used in both accounting and funding contexts. If you’re comparing products, go to Working Capital Loans.
Is a working capital loan unsecured?
Often yes, though some lenders register a general PPSR security interest depending on the structure and risk profile.