Working Capital Facility — definition
Short-term financing arrangement, often revolving, that provides a company with funds to cover day-to-day operating expenses such as inventory, payroll and receivables.
Working capital facilities are typically distinct from project or equipment financing, as they fund ongoing operations rather than specific capital assets. They are commonly secured against receivables, inventory or general company assets and can be drawn and repaid repeatedly within an agreed limit.
Why it matters to industrial buyers
Adequate working capital financing allows a business to fund operations and growth without depleting cash reserves needed for capital projects, keeping investment and operating finance separate.
Key reference points
Typical structure
Working capital facilities are commonly structured as revolving lines of credit, redrawable up to an agreed limit as balances are repaid.
Commonly confused with
Equipment financing
Working capital facilities fund general operating needs; equipment financing is tied specifically to acquiring a defined asset.
How it is used in practice
A processor draws on its working capital facility to purchase raw materials ahead of a seasonal production peak.
Frequently asked questions
Can a working capital facility fund equipment purchases?
It is generally not intended for that purpose; equipment purchases are more commonly funded through dedicated equipment financing or leasing.
How is a working capital facility secured?
Common security includes accounts receivable, inventory or a general security interest over company assets.
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Related terms
Letter of Credit (LC)
Payment instrument issued by a bank on behalf of a buyer, guaranteeing payment to a seller upon presentation of specified documents that confirm contractual obligations have been met.
Equipment Financing
Financing arrangement in which a lender provides funds specifically to purchase machinery or equipment, typically secured by the equipment itself as collateral.
Credit Insurance
Insurance policy that protects a seller or lender against the risk of non-payment by a buyer, commonly used to support export sales and trade financing of industrial equipment.
Sale-and-Leaseback
Financing transaction in which a company sells an asset it owns, such as equipment or a facility, and simultaneously leases it back to continue using it operationally.
More in Project & Equipment Financing
Reference content only. Global B2B Group is independent of equipment manufacturers and financing institutions; definitions are provided for education and do not constitute engineering, financial or legal advice.