Working Capital Loan
Short definition
A working-capital loan funds the OWC need on a short tenor (spot, revolving, discount). Rolling the permanent floor every year is a maturity mismatch.
Detailed explanation
Collateral is often AR and inventory; when DSO breaks, the need and the limit tighten together. Purpose clauses bar capex and dividends.
Cost is compared all-in with an RCF and factoring. Overtrading inflates this product.
Why it matters for the CFO
The cash gap of profitable growth is closed here — or not. The wrong tenor manufactures a crisis every season.
How to read it
Utilisation should recede with the season. A balance that never recedes is the permanent floor — put it on term.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.