The Importance of Having Sufficient Food and Beverage Business Working Capital

If you want to put up a grocery store to serve the needs of your neighborhood, one of the first things you need to secure is sufficient food and beverage business working capital. Your working capital will enable you to run your business smoothly even through the slow seasons. You need that money to pay for inventory, which is necessary for you to make a profit.

One of the more common problems for small business owners such as those in the food and beverage industry is that they tend to underestimate the amount of capital necessary to function properly. You’ll need to use capital for things that a grocery store needs, such as:

  1. Location. You’ll need space to set up your store. You need space to display and stock your wares as well as for your office, and you’ll also need space outside for parking. You may even have to do some renovations, and that too will require money as well. The precise location will also have to be found, because you want a place that’s accessible to your potential customers. The best locations also tend to be more expensive to rent, lease, or own.
  2. Inventory. You’ll have to use your capital to buy food and beverage items, so that you can sell them. You’ll have to try to make sure that you have enough of the more popular grocery items so that you don’t run out of them.
  3. Special equipment. You need to make sure you have the shelves for your wares, cash registers, computers for your accounting and communication needs, adequate lighting, shopping carts, and special containers such as freezers, refrigerators, and refrigerated display cases. A sound system for special announcements and relaxing music may also be helpful.
  4. Personnel. You need people trained to guide customers to the sections they are looking for, to stock the shelves, to keep the place clean, and to handle the food and beverages so that they are stored properly in sanitary conditions. That means you have to make sure you pay their salaries regularly and promptly, and you may also have to spend time and money on their training.
  5. Regular expenses. You will need to pay your monthly water and electricity bills.

Starting your own grocery store without adequate food and beverage business working capital can be problematic, at the very least. And these days, getting financing can be very difficult, since bankers tend to be quite tight-fisted about lending. In some ways, it’s a Catch-22—you need lots of money to buy assets, but you need lots of assets to borrow money for capital. So it’s a good thing that there are other ways to secure your capital aside from just relying on banks. With invoice factoring and other kinds of services, you can continue your business without interruption, even if you don’t have enough money at hand to secure inventory and pay for your daily operational expenses.

Click here to see our food and beverage working capital options

Published by

Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions.

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