FORUM2015: The Problem of Working Capital
April 28, 2015 | 1764 views
With so much going on at the 2015 Skoll World Forum, it's impossible to participate in everything. Our bloggers are sitting in on many of the exciting sessions at this year's event. Read their concise notes and observations to catch up on important discussions you may have missed.
BRINGING IN BIG MONEY: INNOVATIVE FINANCING MEETS INCLUSIVE BUSINESS
THU, APRIL 16, 2015; 10:00 – 11:15
Entrepreneurs are faced with myriad activities – product development, strategy, branding, hiring, administration, customers. After managing all of these, and winning a big order, what blocks many entrepreneurs from growing their businesses? Working capital.
For those less familiar with the topic: if a clothing company wins a $50,000 order, it may require $20,000 to cover upfront costs – customers typically only pay for final products.
That means the entrepreneur needs to spend $20,000 on fabric, materials, employee labor, then ship the final product, and finally wait 30-120 days for the customer to pay the $50,000.
While developed countries typically have banking services to bridge this gap, developing markets often do not, which prevents small businesses from growing. Even though the company has a great product that customers want, nothing happens because there isn’t enough extra cash to buy the raw components for an order.
Many groups in the social impact space are creating innovative solutions for working capital in developing markets, several of which were discussed during the Skoll World Forum.
These solutions involve coordination of hundreds of millions of dollars, across multiple geographies, in areas where regional banks may not have refined standards.
Our finance teams would love to hear more from entrepreneurs in developing markets about working capital problems that prevent your companies from growing – please comment below, and I’ll make sure to share this with people who are working diligently to create solutions. Thanks!